Glossary · PSX term

Accruals.

Accruals are revenues and expenses recorded when they are earned or incurred, not when cash moves.

Definition

Accrual accounting can show profit before cash actually arrives, so large or rising accruals may flag earnings that are not backed by cash. Comparing profit with operating cash flow helps test earnings quality.

Worked example

A company booking a big sale on credit records revenue now, even though the cash arrives later as an accrual.

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