The General Accounting Plan defines “accrual” as follows: “the imputation of income and expenses must be made based on the real flow of goods and services that they represent and regardless of the moment in which the monetary or financial flow derived from them occurs”.

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According to this accounting principle, all banking or economic movements and transactions must be recorded at the moment they take place, whether they have been collected or not.

Are accrual and payment the same thing?

No, although they can coincide in time. Accrual indicates the moment when the operation happens but the payment of it can be deferred or fractionated.

If at the moment of performing the operation (purchase or sale) the payment is made, the accrual will coincide with the payment. If the payment is deferred, it will not coincide with the accrual of the operation.

Accrual in Tax Law

So far we have talked about the accrual principle in accounting terms, but it also exists in taxation.

Tax-wise speaking, the accrual of a tax indicates the moment when the taxable event is understood to have been realized and with it, the moment when the tax obligation is born.

Examples

This concept can be complicated to understand as it is very abstract, but with a couple of examples I’m sure everything will be clearer:

• We buy some reading books online and pay for them immediately with our card. The accrual will occur at the moment of purchase, regardless of whether the payment has been made or not at the moment of purchase.

• We have a mechanical workshop and we sell and mount 4 wheels to a customer. The customer pays us 60% at the moment of mounting and the remaining 40% after 30 days. The accrual of the operation would be the moment when we have made the sale and mounting of the tires, which is when we will issue the invoice to our customer, regardless of when they make the payment.

Much easier, right?

I hope this information is very useful to you ;)