Over 700 finance terms, Shmooped to perfection.
Accrual accounting refers to the practice of accruing costs (or revenues) as they become more likely/certain to occur. let's say an employee gets a $12,000 bonus at the end of the year—in the past 5 years they have earned all of their bonus so it is highly likely that this year will be no different. You would accrue that bonus cost as the months of the year go by at the rate of $1,000 a month. overly simple but you get the idea.