One of the most common questions asked by new accountants is “What’s the difference between accrual and cash accounting? Why do companies use one or the other?”

Accrual accounting requires a company to record revenue and expenses when they occur, rather than when they are paid. In cash accounting, revenues and expenses are recorded when they are paid.

Accrued expenses are reported as they occur and are deducted from current assets.

Accounts Payable is an asset which means it increases in value.