Accruals
Accruals are money earned or spent but not yet paid. See how they work, with examples and Singapore tax basics.
Published Friday 24 July 2026
Table of contents
Accruals are amounts of money that you know will come or go from the business.
Key takeaways
- Accruals record money you've earned or spent before the cash actually changes hands.
- You recognise income when it's earned and expenses when they're incurred, not when payment moves.
- Accrued income sits on your balance sheet as an asset, while an accrued expense sits there as a liability.
- In Singapore, accrual-basis reporting supports your financial statements and your corporate income tax filing.
What are accruals?
Accruals are amounts of money that have been earned or spent, but not yet paid. They capture money coming in and money going out at the point the activity happens, rather than when the cash lands in or leaves your bank account.
This gives you a truer picture of how your business is performing in a given period. You can see what you're owed and what you owe, even before any invoices are settled.
How do accruals work?
Accruals work by recognising income when you earn it and expenses when you incur them, no matter when the money actually moves. This follows the matching principle, which pairs revenue with the costs that helped create it in the same period.
Each accrual also shows up on your balance sheet. Where it lands depends on whether you're owed money or you owe it:
- Accrued income appears as an asset, because it's money you've earned and expect to receive
- An accrued expense appears as a liability, because it's a cost you've incurred and still need to pay
Common examples of accruals
Accruals show up across everyday business activity, often before any payment is made or received. Here are common examples you're likely to come across:
- Unpaid invoices, where you've delivered goods or services but haven't been paid yet
- Goods and services tax (GST), which you collect or owe before it's settled with the tax authority
- Salary and wages, earned by your team during a period but paid in the next one
- Accrued interest, building up on a loan or savings before it's charged or received
- Utilities, used during a month but billed and paid afterwards
Accruals vs cash accounting
The difference between accrual and cash accounting comes down to timing. Accrual accounting records income and expenses when they're earned or incurred, while cash accounting records them only when money enters or leaves your account.
Here's how the 2 approaches compare:
- Accrual accounting records revenue and expenses when the activity happens, giving a fuller view of performance
- Cash accounting records revenue and expenses when cash moves, keeping things simpler day to day
- Accrual accounting suits businesses that invoice, hold stock, or plan around future commitments
- Cash accounting suits very small operations with straightforward, immediate transactions
Types of accruals
Accruals fall into 2 main types, based on whether money is owed to you or by you. Both keep your records aligned with the period the activity belongs to:
- Accrued revenue, also called accrued income: money you've earned but haven't yet received, recorded as an asset
- Accrued expenses: costs you've incurred but haven't yet paid, recorded as a liability
Keeping these 2 apart matters, because accrued income and an accrued expense move different sides of your balance sheet. One reflects what's coming in, the other reflects what's going out.
Accruals and tax in Singapore
In Singapore, most businesses prepare accounts on an accrual basis under the Singapore Financial Reporting Standards (SFRS). That means your financial statements reflect income and expenses in the period they relate to, not the period they're paid.
Accrued income and accrued expenses feed directly into the profit you report to the Inland Revenue Authority of Singapore (IRAS) for corporate income tax. Recognising them in the right period helps your tax position line up with your actual trading.
GST is a useful example. You usually account for GST at the earlier of the invoice date or the date you receive payment, so it's recorded when the transaction happens rather than only when cash moves.
Track your accruals automatically with Xero
Keeping accruals accurate by hand takes time and leaves room for error, especially as your business grows. Xero brings your invoices, bills, and transactions into one place, so income and expenses land in the right period without the manual work.
You get a clear, real-time view of what you're owed and what you owe, ready for reporting and tax time. See what that looks like for your business and Get one month free.
FAQs on accruals
Here are answers to some frequently asked questions about accruals to help you apply the concept with confidence.
Is an accrual an asset or a liability?
It can be either. Accrued income is an asset because you're owed money, while an accrued expense is a liability because you owe money.
Do small businesses in Singapore need accrual accounting?
Most Singapore businesses report on an accrual basis under the SFRS. Checking with a qualified accountant helps you confirm what suits your situation.
What's the difference between accrued income and accrued revenue?
They mean the same thing: money you've earned but not yet received. Both are recorded as an asset on your balance sheet.
When do you record an accrual?
You record an accrual in the period the income is earned or the expense is incurred. The timing follows the activity, not the payment.
Related terms
Learn more about accruals
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.