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full accrual accounting

An accounting system which incorporates accrual accounting with expense basis and periodic allocation of expenses between accounts. Accrual accounting recognizes assets and liabilities at the time they are accrued and not at the time payment changes hands. For example, if an invoice is sent to a customer in December but not paid until January, the invoice is recorded as income for December. When liabilities have been incurred a corresponding entry must be made that recognizes the liability as either an expense or asset. Expense basis recognizes the liability as the item purchased, such as inventory, is used and not when it is acquired. Because of this periodic allocations must be made to move the cost of the expenses from the balance sheet to the proper expenditure allocation.

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