MEPX
Chapter 4 of 10All chapters
  1. 1What accounting is for
  2. 2The accounting equation
  3. 3The three statements
  4. 4Accruals and matching
  5. 5Profit against cash
  6. 6Bookkeeping in practice
  7. 7Reading the numbers
  8. 8Costs
  9. 9Controls and audit
  10. 10Reading a company report

Chapter 4 of 10

Accruals and matching

When something counts.

Recording when earned

Revenue is recorded when earned and costs when incurred, regardless of when cash moves. That is what lets a period's profit reflect that period's activity.

  • An invoice sent in March for work done in March is March revenue.
  • Prepaid annual costs are spread across the months they cover.

Depreciation

An asset used for years has its cost spread across those years rather than charged at once. No cash moves, which is why cash flow statements add it back.