What is Accrue in Accounting?

To accrue means to record revenues or expenses in the accounting records that have not yet been entered. This approach is used in accrual basis accounting as part of the closing process at the end of each reporting period. In essence, revenue is accrued if it has not yet been billed to the customer, while expenses are accrued when no billing from the supplier has yet been received.

The concept can also apply to a gradual accumulation over time. For example, a savings account can accrue interest income, while an employee can accrue vacation time.

When Not to Accrue

Accruals are not used in cash basis accounting. Under the cash basis, revenue is recorded only when the related cash payment is received from customers, while expenses are only recorded when the related cash is paid to suppliers.