What is Accrual Accounting?
Accrual accounting records revenue when earned and expenses when incurred, regardless of when cash is received or paid — the standard method for GST-registered businesses in India.
Accrual vs Cash Basis
Under accrual, a Sales Invoice posted today creates a revenue and a receivable even if payment arrives next month. This gives a truer picture of profitability. Cash basis records only when cash moves. The Companies Act 2013 mandates accrual for all registered companies in India.
Accrual Entries in ERPNext
ERPNext operates on accrual accounting by default. Sales Invoice submission records revenue and debtor simultaneously. Purchase Invoice records expense and creditor. Payment Entry clears the AR/AP. Accrual adjustments (provisions, prepayments) are posted via Journal Entries at period end.
Infonoxe Technologies specialises in ERPNext implementation and custom software for Indian businesses.
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