Accrual accounting
Recording revenue when earned and expenses when incurred, regardless of when cash actually moves.
What it means
Accrual accounting records revenue when it is earned and expenses when they are incurred — not when cash changes hands. Under this method, an unpaid invoice appears as revenue and a receivable as soon as the sale is made, even though no money has been received.
It contrasts with cash accounting, which records transactions only when money is actually paid or received.
Why it matters
Accrual accounting gives a truer picture of profitability, but it also means profit can look healthy while cash is tight — because sales are counted before customers pay. That is why tracking accounts receivable and collection times matters so much. Which method you may use, and the GST timing rules, depend on your situation — check with the ATO or your accountant.
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