Accrual accounting is the only method that adheres to generally accepted accounting principles (“GAAP”) and it requires more technical skill and discipline than does cash-based accounting. SoPro accountants have years of experience in accrual accounting and can help make the transition painless. We are familiar with both U.S. and international accounting standards, and are therefore acquainted with differences in treatment across countries.
How it Works – Accrual Accounting
- We work with you to define revenue recognition rules, along with accruals to record expenses incurred to earn the revenue
- We record prepaid expenses, depreciations, amortizations, and deferred revenues to make sure financial data is properly accrued
- We produce accrued financial statements that give a more accurate understanding of profitability and overall performance
- We work with your CPA to control tax deductions, taxable income, and the size of quarterly tax liabilities
Benefits of Accrual Accounting
U.S. Businesses with gross revenues over $5 million are required to use accrual accounting, where revenue and expenses are recorded during the period they are actually earned or incurred (rather than when cash is paid or received). This matching principle is necessary for companies to accurately gage whether they are “making money”. And it gives your business more control over taxable income and the size of quarterly tax liabilities.