What are "Accrual Basis Entries" defined as?

Accrual basis entries are defined as entries that recognize revenues and expenses when they are incurred, regardless of when cash transactions occur. This principle is fundamental to the accrual basis of accounting, which adheres to the matching concept. This means that revenues should be recognized in the period they are earned, and expenses should be recognized in the period they help generate revenue, even if the actual cash inflows and outflows happen at a different time.

For example, if a company provides a service in December but doesn't receive the payment until January, the revenue would still be recorded in December under the accrual basis. This approach provides a more accurate picture of a company's financial performance and position over time, enabling better decision-making based on complete information.

Other options do not capture this principle accurately; ignoring cash transactions doesn't reflect the nature of accrual accounting, focusing solely on cash flow contradicts the accrual basis, and limiting entries to year-end would not encompass the continuous nature of recognizing revenue and expenses as they are incurred throughout the accounting period.