Muhammad Aamir's presentation defines the accrual concept as recording business transactions when they occur rather than when related payments are received or made. This accrual basis of accounting provides more useful financial information. Examples given include an airline not recording ticket sales as revenue until flights occur, and an accounting firm expensing a portion of prepaid rent each quarter based on time elapsed. The accrual concept signifies recording expenses when services are used and bills received, rather than when payment is made. It allows businesses to better understand actual expenses and income over time and calculate net profit accordingly.

1. Presentation By :
Muhammad Aamir
Roll no: 03

2. Definition of Accrual Concept:
Business transactions are recorded when
they occur and not when the related
payments are received or made.
This concept is called accrual basis of
accounting and it is fundamental to the
usefulness of financial accounting
information.

3. Examples for the Accrual Concept:
 An airline sells its tickets days or even weeks before the
flight is made, but it does not record the payments as
revenue because the flight, the event on which the revenue is
based has not occurred yet.
 An accounting firm obtained its office on rent and paid
$120,000 on January 1. It does not record the payment as an
expense because the building is not yet used. While
preparing its quarterly report on March 31, the firm
expensed out three months' rent i.e. 30,00 [$120,000/12*3]
because 3 months equivalent of time has expired

4. Examples for the Accrual Concept:
 A business records its utility bills as soon as it receives them
and not when they are paid, because the service has already
been used. The company ignored the date when the payment
will be made.

5. Significant of Accrual Concept:
 It helps in knowing actual expenses and
actual income during a particular time
period.
 It helps in calculating the net profit of the
business.

6. Thank You