Acctual concept implies that the revenue should be recognised and recorded in accounting as and when it is earned or it accrues irrespective of the time or period of receipt. Similarly, expenses should be recognised and recorded in accounting as and when it is incurred irrespective of the period of payment thereof. In short, this concept is relevant in the area of revenue and costs.

Revenue or costs are accrued, i.e., recognised, as they are earned or incurred and not only when cash is received or paid. Also, the revenue and costs will be recorded in the period to which they relate, e.g., When goods are sold on credit to a customer, the revenue should be recognised in accounting when such goods are sold even though cash is not yet received for such sale.

Salary payable for March 2018 will be treated as expense for the month of March 2018 even if it is paid in April 2018. This concept have some limitations. In case of gold mine, as soon as the production of the gold is obtained it is recorded in the books at selling price. In construction of bridge, road or building, profit is calculated even though the construction is incomplete. Professionals like advocates, doctors, chartered accountants, etc. record their fees as revenue at the time of its actual receipt.

The concept of accrual of revenue is similar to concept of realisation of revenue. It guides about the point in time when revenue should be recognised or when revenue should be treated as realised. However, accrual concept deals with accrual of not only revenue but also that of costs.