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The accrual basis of accounting recognizes revenues when earned (a product is sold or a service has been performed), regardless of when cash is received. Expenses are recognized as incurred, whether or not cash has been paid out.
The government-wide financial statements (i.e. the Statement of Net Position and the Statement of Activities) report information on all of the non-fiduciary activities of the primary government and its component units.
Explanation: In accrual basis accounting, expenses are recorded when they are incurred, not when the related cash transaction happens.
Under accrual accounting, revenue is recognized: when cash is received, and expenses, when cash is paid.
The revenue recognition principle is a key component of accrual-basis accounting. This accounting method recognizes the revenue once it is considered earned, unlike the alternative cash-basis accounting, which recognizes revenue at the time cash is received.
Accrual-Basis Accounting Transactions recorded in the periods in which the events occur. Revenues are recognized when services performed, even if cash was not received. Expenses are recognized when incurred, even if cash was not paid.