Accrual basis

Why UK company income and expenses follow the underlying rights, obligations, and reporting period rather than cash timing alone.

Company-law accrual principle

Reviewed · Current · Law · From 6 April 2008

UK company accounts take all income and charges relating to the financial year into account without regard to when cash is received or paid.

Cash and invoice dates are evidence, but neither date alone decides which reporting period bears an income or expense.

Exceptions and branches

• Special circumstances can require a disclosed departure under the applicable regulations.
• Other entity types and non-UK jurisdictions need their own authority review.

Current FRS 102 accrual and recognition basis

Reviewed · Current · Accounting standard · From 1 January 2026

For periods beginning from 1 January 2026, FRS 102 requires accrual accounting and recognition by the definitions and criteria for assets, liabilities, income, and expenses.

A right to receive future goods or services can be an asset; a present obligation can accumulate as services are obtained. A free-standing matching label cannot create an asset or liability that fails the recognition model.

Exceptions and branches

• Early application can make this edition relevant to an earlier accounting period.
• A transaction addressed by a specific FRS 102 section follows that section.

Current FRS 105 accrual and recognition basis

Reviewed · Current · Accounting standard · From 1 January 2026

For periods beginning from 1 January 2026, FRS 105 requires a micro-entity to use accrual accounting and recognise rights and obligations through its asset and liability model.

A right to receive future goods or services can be an asset; a present obligation can accumulate as services are obtained. A matching label alone cannot create an asset or liability.

Exceptions and branches

• Early application can make this edition relevant to an earlier accounting period.
• A transaction addressed by a specific FRS 105 section follows that section.

FRS 102 before the Periodic Review 2024 transition

Reviewed · Historic · Accounting standard · Through 31 December 2025

The January 2022 FRS 102 edition requires accrual accounting and recognition only when the applicable asset, liability, income, or expense criteria are satisfied.

This edition supplies the reviewed accrual principle for accounting periods beginning before 1 January 2026 when the Periodic Review 2024 amendments were not early-applied.

Exceptions and branches

• Early application selects the September 2024 edition.

FRS 105 before the Periodic Review 2024 transition

Reviewed · Historic · Accounting standard · Through 31 December 2025

The January 2022 FRS 105 edition requires a micro-entity to use accrual accounting and to recognise an asset only where its recognition criteria are met.

This edition supplies the reviewed accrual principle for periods beginning before 1 January 2026 when the Periodic Review 2024 amendments were not early-applied.

Exceptions and branches

• Early application selects the September 2024 edition.

What changed

• 31 December 2025: The January 2022 FRS 102 edition requires accrual accounting and recognition only when the applicable asset, liability, income, or expense criteria are satisfied.

• 31 December 2025: The January 2022 FRS 105 edition requires a micro-entity to use accrual accounting and to recognise an asset only where its recognition criteria are met.

Related concepts

• Prepayments

• Accrued expenses

• Expense timing adjustments

• Profit and Loss reports

Linked from

• Prepayments

• Accrued expenses

• Expense timing adjustments

Sources

• The Small Companies and Groups (Accounts and Directors' Report) Regulations 2008 — Schedule 1, Part 2, paragraph 14. Primary authority.

• The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 — Schedule 1, Part 2, paragraph 14. Primary authority.

• FRS 102 (September 2024 edition) — Paragraphs 2.33 to 2.64, especially paragraph 2.48. Accounting standard. Link-and-cite; publisher-hosted.

• FRS 105 (September 2024 edition) — Paragraphs 2.9 to 2.34, especially paragraph 2.24. Accounting standard. Link-and-cite; publisher-hosted.

• FRS 102 (January 2022 edition) — Paragraphs 2.27 to 2.36, especially paragraph 2.36. Accounting standard. Link-and-cite; publisher-hosted.

• FRS 105 (January 2022 edition) — Paragraphs 2.21 to 2.24. Accounting standard. Link-and-cite; publisher-hosted.

How sources are ranked

Knowledge version: sterling-knowledge@2026-09-11.7. Last checked 11 September 2026.