Investing term

What is Accruals?

Accounting entries that record revenue or expense before cash actually moves.

Accruals are accounting entries that record revenue or expenses when they're earned or incurred — not when cash changes hands. They're what separates profit (accrual-based) from cash flow, and they make the income statement reflect economic reality rather than just the timing of payments. Large or rising accruals are a classic place to look when earnings quality is in question.

For example

A magazine collects $120 for a yearly subscription upfront but accrues just $10 of revenue each month as it delivers issues — matching income to the work done.

Accruals is taught hands-on in Stage 14 — Reading Financial Statements.

See the lesson →

Related terms

Accounts receivable (A/R)Money customers owe the company for goods or services already delivered but not yet paid.Annual reportThe yearly disclosure that includes audited financials, MD&A, and footnotes — the primary source for serious investors.Balance sheetThe 'photo' statement — what the company owns, what it owes, and what's left for owners, on a single date.Capital expenditures (CapEx)Money spent on long-lived assets — buildings, equipment, software, improvements.
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