Accrual basis
In one sentenceRecognizing revenue when it is earned and expenses when they are incurred, regardless of when cash is received or paid; it is the basis required by international standards.
Simply put
Under the accrual basis you ask: when did the transaction happen? Not: when did the money come in or go out. A service you provided in December is December revenue even if you collect for it in February.
On this basis each month's profit reflects what actually happened in it, which is why the financial statements required by official bodies and banks are built on it.
Worked example
A contracting business completed renovation work in December worth 50,000 SAR and collected the amount from the client in January.
Work completed in December50,000 SAR
Cash collected in December0 SAR
Cash collected in January50,000 SAR
December revenue on the accrual basis50,000 SAR
Don't confuse it with
Cash basisIt records revenue when cash is received and expenses when paid, so December revenue in the example would be zero.