#accrual-accounting
Accrual method accounting principles, conversion from cash basis, and revenue recognition timing
Book each Stripe dollar once as gross revenue when earned; route fees and refunds through a clearing account and treat payouts as transfers, never income.
Stripe payouts are net cash transfers, not revenue — book annual prepayments to deferred revenue and recognize one-twelfth monthly.
Book allowance estimates monthly, write off dead invoices with a Bad Debt credit memo, and reinstate before logging recoveries, or the allowance never clears.
Profit books invoiced revenue before cash arrives while loan principal, inventory, and draws drain cash invisibly — find the leak on your cash flow statement.
Cash-to-accrual switches run through IRS Form 3115: positive Section 481(a) catch-ups spread over four years, so cutoff discipline sets the bill.
A vendor deposit is an asset, not an expense: book it to Advances to Suppliers, apply it to the final invoice, and deduct only when IRS timing rules allow.
Record unconditional pledges as revenue when promised, discount multi-year amounts to present value, and reserve for pledges that never arrive.
FRF for SMEs is the AICPA's accrual framework for owner-managed firms: amortized goodwill, no VIE analysis, no ASC 842. Check loan covenants first.
Svix and Hookdeck bills are cost of revenue, not overhead: split platform fee from metered usage, accrue before invoicing, and track cost per 1,000 events.
GAAP requires the allowance method while the IRS requires direct write-off under Section 166, so most accrual-basis businesses run both and reconcile the difference. This guide gives the journal entries for each, three ways to estimate the reserve (percentage of credit sales, an aging schedule, specific identification), and the five collection KPIs — DSO, CEI, current-bucket share, bad debt to sales, and average days delinquent — that reveal when a reserve has drifted from reality.
Manufacturers budget roughly $75 billion a year in co-op advertising funds and about half goes unclaimed. How accruals, pre-approval and proof-of-performance claims work, why claims get denied, and why ASC 705 presumes a vendor allowance reduces COGS rather than advertising expense.
For tax years beginning in 2026 the Section 448(c) gross-receipts threshold is $32 million, up from $31 million. OBBBA adds a reported $80 million lane for qualifying manufacturers and lets small businesses elect retroactive 2022–2024 R&D expensing under Section 174A by July 6, 2026 — here is the threshold math, who is forced onto accrual, and how a method change works.
