Accrual
Accrual refers to recording income and expenses when they are earned or incurred, even if no cash has been received or paid yet.
In short: sa accrual method, sinusulat mo na ang kita o gastos kahit hindi pa nagkakapera o hindi pa nagbabayad.
This is different from the cash method, where transactions are recorded only when money actually moves.
Why Accrual Matters
For Filipino MSMEs, the accrual method gives a more accurate picture of your business performance. It helps you understand:
- Real profitability — not just how much cash is on hand
- Upcoming expenses — like bills, supplier payments, or salaries
- Expected income — from customers who haven’t paid yet
- Seasonal patterns — useful for planning inventory and staffing
- Financial health — especially when applying for loans or investors
Many Filipino businesses use cash-based tracking (notebooks, ledgers, POS), but shifting to accrual gives you a clearer, more professional view of your finances — something banks, accountants, and BIR often prefer.
Example / Context
Example 1 (Service Business):
You finish a ₱20,000 project today and send an invoice due in 15 days.
Under accrual accounting, you record the ₱20,000 as income today, even if the client pays later.
Example 2 (Carinderia):
You receive ₱8,000 worth of ingredients from your supplier but will pay next week.
Under accrual, you record the ₱8,000 as an expense today, even if you haven’t paid yet.
Example 3 (Online Store):
A customer orders and receives an item today but chooses COD and pays tomorrow.
Accrual method: record the sale today.
Related Terms
FAQs
1. Is accrual better than cash method?
Accrual gives a more accurate financial picture, but cash method is simpler. Many MSMEs start with cash method then shift to accrual as they grow.
2. Does BIR require accrual accounting?
Most registered businesses are expected to use accrual, especially VAT-registered or corporations. Small sole proprietors often use cash basis informally.
3. Is accrual harder to maintain?
A bit — because you track income and expenses even without cash movement. But tools like POS systems, spreadsheets, or accounting apps make it easier.
4. Why do banks prefer accrual-based financial statements?
Because accrual shows the real financial health of your business — not just how much cash you happen to have today.