What is accrual-basis accounting?
Accrual-basis accounting records revenue when it is earned and expenses when they are incurred, regardless of when cash actually moves. This contrasts with cash-basis accounting, which records transactions only when cash is received or paid.
Accrual-basis is required under U.S. GAAP and IFRS for most companies above small thresholds. Startups generally transition from cash basis to accrual basis as they prepare for institutional fundraising, audits and an eventual exit.