accrues

Accrue is a verb meaning to increase or come to someone or something as time passes; to be earned or owed but not yet received or paid. The form accrues is used for third-person singular, as in "interest accrues at 5% per year" or "benefits accrue to employees over service years." In finance and accounting, accrual refers to recognizing revenues and expenses when they are earned or incurred, not when cash is exchanged. This is a core principle of accrual accounting (as opposed to cash basis) used under GAAP and IFRS.

In practice, accruals include accrued revenues (income earned but not yet billed or collected) and accrued expenses (expenses incurred but not yet paid or recorded). Adjusting entries at period end record these items to reflect the true financial position: for example, accrual of revenue increases accounts receivable and revenue; accrual of an expense increases an expense account and a liability.

Accruals are distinct from cash flows: cash might be received later, or paid later, but the economic event is recognized when it occurs. The term also appears outside accounting, referring to benefits, rights, or obligations that accumulate over time, such as pension benefits accruing to a worker or a contract term that accrues a right to future consideration.

Common related terms include accrued interest, accrued expenses, and unearned revenue (the opposite of accrued revenue).