Accrual Accounting
Accrual accounting is a fundamental accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged. This contrasts with cash accounting, which records transactions only when money changes hands. It provides a more accurate picture of a company's financial health by matching revenues with related expenses in the same accounting period.
Developers should learn accrual accounting when building financial software, enterprise resource planning (ERP) systems, or any application that tracks business performance, as it's the standard for most businesses and required by generally accepted accounting principles (GAAP). It's essential for creating accurate financial reports, such as income statements and balance sheets, which are critical for decision-making, compliance, and investor relations.