What is the Accrual Basis? When is it calculated?

Date: 05 January 2026

In accounting practices, accurately recording a company's income and expenses is crucial for the reliability of financial statements. One of the fundamental accounting principles used in this regard is the accrual basis. The accrual basis is a widely used method in accounting and tax practices that aims to reflect a company's financial situation as accurately as possible.

What is the Accrual Basis?

The accrual basis refers to the accounting of income and expenses in the period in which they occur, regardless of whether the money has actually been collected or paid. The key factor here is the date on which the economic event occurred.

This method aims to reveal the actual operating results of a business over a specific period.

The Fundamental Principle Underlying the Accrual Basis

The accrual basis is based on the periodicity principle of accounting. The periodicity principle stipulates that the activities of a business should be evaluated by dividing them into specific periods, and that the income and expenses of each period should be recorded as belonging only to that period.

In this way:

Income is accounted for in the correct period.
Expenses are reflected in the period to which they relate.
Period profit or loss is calculated correctly.

Accounting records made without the accrual basis can mislead the financial situation of the business.

When is the Accrual Basis Applied?

The accrual basis is applied at the moment the income or expense legally and actually arises. In other words, accrual is considered to have occurred when the economic outcome of the transaction is finalized.

The main situations in which accrual occurs are:

Delivery of goods
Completion of service
Issuance of invoice
Occurrence of an event giving rise to an expense
Finalization of the business's debt or receivable right
For example, if a business provided a service in December, even if the payment for this service is collected in January, the income accrues in December.

The Importance of the Accrual Basis in Accounting

The accrual basis serves the principles of accuracy and truthfulness in accounting records. It is particularly important for the healthy analysis of a company's financial situation when preparing balance sheets and income statements.

Thanks to the accrual basis:

The company's true performance is measured.
Revenues and expenses are reported in a balanced manner.
Misleading profit or loss calculations are prevented.
Financial statements become comparable.

Therefore, the accrual basis is considered fundamental in professional accounting systems.

Accrual Basis in Tax Practices

In Turkey, the accrual basis holds a significant place in tax legislation. In determining commercial profit, the principle adopted is that income and expenses must relate to the period to which they are associated.

From a tax perspective, accrual means:

The right to receive income arises.
The expense becomes final.

This approach ensures the correct calculation of the tax base and supports fairness in taxation.

Which Businesses Apply to the Accrual Basis?

The accrual basis is used especially by:

Businesses that keep books according to the balance sheet basis
Joint-stock companies
Limited liability companies
Medium and large-scale firms

For these businesses, the accrual basis is not only a legal requirement but also necessary for the sound management of finances.

What is an Accrual Entry?

An accrual entry is the accounting for income or expenses that have not yet been paid but need to be recorded as of the accounting period. These entries are usually made at the end of the period.

The purpose of accrual entries can be summarized as follows:

To accurately show the income and expenses of the period
To ensure the accuracy of financial statements
To prevent under or overcalculation of profits

Common Applications of the Accrual Basis

The accrual basis is applied to many different transactions. Some of these are:

Personnel salaries and wages
Rent expenses
Expenses such as electricity, water, and natural gas
Interest income and expenses
Service fees

These transactions are accounted for in the period to which they relate, even if the payment dates are different.

The Importance of Documents in Accrual Accounting

Documents are of great importance in accrual accounting. This is because proof of which period an income or expense belongs to is provided through documentation.

Frequently used documents include:

Invoices
Payrolls
Contracts
Expense receipts
Accrual slips

These documents form the basis of accounting records.

Benefits of the Accrual Basis for Businesses

The main benefits of the accrual basis for businesses are:

Increased reliability of financial statements
Enables sound financial analysis
Accurate measurement of periodic performance
Reduction of tax risks
Strengthening of the corporate accounting structure

These benefits make the accrual basis an indispensable element of modern accounting.

Points to Consider When Applying the Accrual Basis

For the correct application of the accrual basis, some points must be considered:

The period to which income and expenses belong must be correctly identified.
Documents must be kept complete and in an organized manner.
End-of-period entries must be made carefully.
Accounting standards must be followed.

These points ensure that accounting records are sound and compliant with the law.

Conclusion

The accrual basis is one of the fundamental accounting methods that most accurately reflects the financial situation of businesses. By ensuring that income and expenses are accounted for in the correct period, it both increases the reliability of financial statements and creates a fair structure in tax applications.

Especially for businesses with professional accounting systems, the accrual basis is not only a preference but also a fundamental condition for sustainable and healthy financial management.