accrual

noun

ac·cru·al | \ ə-ˈkrü-əl

Definition of accrual

(Entry 1 of 2)

1 : the action or process of accruing something money gained by the accrual of interest

2 : something that accrues or has accrued an employee's vacation accruals

accrual

adjective

Definition of accrual (Entry 2 of 2)

: relating to or being a method of accounting that recognizes income when earned and expenses when incurred regardless of when cash is received or disbursed (see disburse sense 1a) — compare cash entry 2

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Examples of accrual in a Sentence

Noun

had an accrual of $100 through interest on my savings account last year

Recent Examples on the Web: Noun

The big changes include pre-arrival upgrades, including one room upgrade on a member's first paid stay, points accrual to earn free nights, and greater redemption flexibility. — Ryan Craggs, Condé Nast Traveler, "Leading Hotels of the World Just Improved Its Loyalty Program," 3 Oct. 2018 The bonus accruals rose on annual results that compared favorably with 2017 results that were marred by a cyberattack. — Paul Ziobro, WSJ, "FedEx Sounds Alarm on Tariffs," 17 Sep. 2018 The plans have been frozen for benefit accruals in 1996 for former Kmart participants and in 2005 for Sears’s employees, the agency said. — Tatyana Shumsky, WSJ, "Bankruptcy Filing Shifts Spotlight to Sears’s Pension Plans," 15 Oct. 2018 Note: Alitalia/MilleMiglia and Aerolineas Argentinas/Aerolineas Plus are not eligible for mileage accrual. — Bridget Hallinan, Condé Nast Traveler, "You Can Now Earn SkyTeam Miles by Renting a Hertz Car," 17 Oct. 2018 But efforts to change the system, including a 1994 ballot initiative, were blocked by the State Supreme Court, which ruled that accruals could not be reduced during any public worker’s career. — Mary Williams Walsh, New York Times, "A $76,000 Monthly Pension: Why States and Cities Are Short on Cash," 14 Apr. 2018 Previous full-time service with any political subdivision of the state of Ohio may entitle employees to extra service credit for vacation accrual. — Andrew J. Tobias, cleveland.com, "Cuyahoga County sending property tax bills," 20 Dec. 2017 Examples include future tax deductions for past losses or an accrual for pension obligations that haven’t been deducted. — Tatyana Shumsky, WSJ, "Corporate Accountants Can Cancel Christmas: Swift, Complex Changes May Be Required for Tax Bill," 16 Dec. 2017 New hires now have a maximum sick leave accrual of 80 days and would not receive any payout of accrued sick leave upon retirement. — Vinny Vella, Courant Community, "Hartford Police Union Ratifies Contract," 8 Dec. 2017

Recent Examples on the Web: Adjective

Bronin has also negotiated with several city unions to revise sick and vacation accrual policies. — Jenna Carlesso, Courant Community, "Former Hartford Police Chief Named Security Director For City Schools," 27 Apr. 2018 Under accrual basis accounting, expenses are matched with the related revenues and are reported when the expense occurs, not when the cash is paid. — Jeff Piorkowski/special To Cleveland.com, cleveland.com, "Mayor Brennan replaces University Heights' finance director," 17 Apr. 2018 Ones with gross receipts below $25 million can use the simpler cash method of accounting rather than the accrual method; the previous ceiling was $5 million. — Conrad De Aenlle, New York Times, "Can You Get Rich From the New Tax Law by Becoming a Company?," 23 Feb. 2018 Generally, manufacturers and other companies that have inventory are required to use the accrual method, but current law exempts businesses with average annual revenue of $5 million or less. — Washington Post, "5 things small business owners should know about tax bills," 13 Dec. 2017 In addition, the board increased Shoenberger’s vacation accrual rate from 6.5 hours to eight hours per pay period. — Luke Money, Daily Pilot, "Mesa Water District approves pay increase and bonus for general manager," 20 Dec. 2017 Employers who want to avoid the carry-over requirements can skip the accrual process and just offer the maximum amount of sick time at the start of the year. — Alexia Elejalde-ruiz, chicagotribune.com, "Employers call new Cook County sick leave law an administrative nightmare," 29 June 2017 Changing that and reducing future benefit accrual rates could profoundly reduce California pension costs. — Mercury News Editorial Board, The Mercury News, "Editorial: Pension reform in hands of California Supreme Court," 16 Jan. 2017 The deal is worth about $240,000 and included signing bonuses and an increased vacation accrual cap. — Greg Mellen, Orange County Register, "Fountain Valley’s proposed 2017-18 budget includes cash for new fire and police hires, road and park improvements," 18 May 2017

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'accrual.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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Last Updated

26 Apr 2019

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Time Traveler for accrual

The first known use of accrual was in 1804

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More Definitions for accrual

accrual

noun

Financial Definition of accrual

What It Is

Accruals are records of revenue and expenses in the periods in which they are incurred. They are a key component of the accrual method of accounting.

How It Works

Company XYZ must insure one of its buildings. The insurance company bills Company XYZ $600 every six months (one bill in January, the next in July). If each bill is for six months' coverage, then under the accrual method, Company XYZ would not record a $600 expense in January and a $600 expense in July (doing so would mean Company XYZ was using the cash method); it would instead record a $100 expense each month for the whole year. That is, Company would match the expense to the periods in which it is incurred: $100 for January, $100 for February, $100 for March, and so on. As you can see, accruals recognize economic events in certain periods regardless of when actual cash transactions occur.

Accrual accounting is the opposite of cash accounting, which recognizes economic events only when cash is exchanged. The accrual method is more common than the cash method, and the IRS often requires companies to use accruals when they have more than a certain level of revenues or carry inventory.

Why It Matters

Although it is more complex, harder to implement and harder to maintain than the cash method of accounting, most analysts agree that accruals provide a more accurate picture of a company's performance. That's because in any given accounting period, revenues are associated with their corresponding expenses, which gives a truer picture of the real costs of producing the revenue in a given period.

Additionally, accruals allow companies to reflect the fact that sales may have been made and expenses incurred even if cash has not changed hands yet (as is often the case with sales made on credit and similar circumstances). This in turn produces financial statements that are comparable over time.

However, one of the big drawbacks of accruals is that they tend to obscure the nature of the company's actual cash position (e.g., a company may show millions in sales but only have $10 in its cash account because its customers haven't paid yet).

Source: Investing Answers

accrual

noun

ac·cru·al | \ ə-ˈkrü-əl