Accrual accounting records transactions when they happen — not when money changes hands. Revenue is recognized when earned (even if unpaid), and expenses are recorded when incurred (even if not yet paid).
For example, if you deliver $20,000 worth of goods in December but the customer pays in January, accrual accounting records the revenue in December. This gives a more accurate picture of financial performance for each period.
Accrual accounting is required under GAAP and IFRS for most businesses. It provides a more complete and accurate view of a company's finances compared to cash-basis accounting, though it is more complex to maintain.