Accrual basis accounting recognizes that an economic transaction has occurred even if cash hasn’t exchanged hands yet and takes into account the timing of transactions when it comes to reporting income and expenses. With accrual basis, businesses record revenues and expenses when they are earned or incurred—not necessarily when they are paid for. This allows companies to have a more accurate long-term view of their performance by recognizing money earlier and helps keep their many financial accounts in order. Ultimately, with this method of accounting, businesses can gain insight into their profitability or losses in real time.