How can you remember the relationship between Accrual and Deferral cash orders?

The best way to remember the relationship between Accrual and Deferral cash orders is to focus on the timing of when revenues and expenses are recognized in relation to when cash is actually received or paid.

Accrual accounting records revenues and expenses when they are incurred, regardless of when cash transactions occur. This means that even if cash has not yet changed hands, income or expenses are recognized in the financial statements at the point of the transaction. Therefore, accrual happens before cash is received in the case of revenues and usually before cash is paid in the case of expenses.

This understanding indicates that accrual transactions take precedence over the cash transactions in the accounting cycle, which aligns with the notion that accrual comes before cash. This principle helps distinguish between the two methods of recording accounting transactions, emphasizing that the occurrence of economic events is critical to financial reporting, focusing on the action rather than the cash flow itself.