Accrual Vs. Cash-Based Accounting
Source: Wells Fargo
When it comes to accounting methods for business, two types are generally used: accrual and cash-based. The type of business, style of incorporation or level of sales - and sometimes a combination of those factors - determines which method you use. Under the accrual method, revenues are recognized at the time the goods or services are sold, which results in accounts receivable. Expenses are recognized when obligations are incurred, which gives rise to accounts payable.