In accrual basis accounting, when is income recognized?

In accrual basis accounting, income is recognized when it is earned, which typically occurs when it is scheduled to be paid, regardless of when cash is actually received. This method aligns with the principle of matching revenue with expenses incurred to generate that revenue within the same accounting period, thus providing a more accurate reflection of a company’s financial position.

Under this system, income is recorded as soon as there is an agreement to pay for goods or services, meaning that the obligation to pay is established, which represents a future inflow of resources. This approach contrasts with cash basis accounting, where income is only acknowledged when cash is received, which can lead to an incomplete view of a business's financial health.

Recognizing income at the time it is scheduled to be paid ensures that financial statements reflect all resources that a business is entitled to receive, thus enabling stakeholders to make better-informed decisions based on realistic financial performance.