What is Accrual Basis Accounting for Nonprofits?

Accrual basis of accounting for nonprofits is a method of accounting in which revenues and expenses are recognized when they are earned or incurred, regardless of when cash is received or paid out. This means that revenue is recorded when an organization earns it, even if the payment has not yet been received. Likewise, expenses are recorded when they are incurred, even if the payment has not yet been made. The accrual basis of accounting provides a more accurate picture of an organization’s financial performance.

There are two other commonly used accounting methods for nonprofits: cash basis accounting and modified cash basis accounting. Learn more about the differences between cash basis, accrual basis, and modified cash basis accounting by visiting this article:

Caroline Grimm

Caroline Grimm is an accounting educator and a small business enthusiast. She holds Masters and Bachelor degrees in Business Administration. She is the author of 13 books and the creator of Accounting How To YouTube channel and blog. For more information visit: https://accountinghowto.com/about/

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