Accrual basis accounting definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. The term accrual basis accounting can be defined as: Accounting system that recognizes revenues when earned and expenses when incurred; the basis of GAAP. The term accrual basis accounting is the core accounting concept and method used by most businesses and in most textbooks and the accrual method is the method of GAAP. The accrual method can be contrasted against the cash method, the accrual method recognizing revenue when earned and expenses when incurred, the cash method recognizing revenue and expense when cash is received and paid. The accrual method is more accurate in that it pinpoints the point when revenue was earned and when expenses incurred.
