Accruals represent economic events that have been incurred but are not yet recorded due to timing differences between the occurrence of the event and the corresponding cash transactions or accounting entry. They are a cornerstone of the accrual basis accounting system, which aims to give a clearer and more accurate picture of a company's financial state as of a particular period.

For example, a company may have delivered goods or services to a client but has yet to issue an invoice; this revenue would be recognized under an accrual. Similarly, a company may have received a utility service but not yet received the bill at the end of the period. Recognizing this expense via an accrual ensures compliance with the matching principle, which states that expenses should be matched with revenues in the same accounting period.

Accruals are crucial during month-end, quarter-end, and year-end financial processes, ensuring the financial statements provide a true and fair view of the company's financial performance and position. Over- or under-accruing can affect financial analytics and decisions. For example, incorrect accruals can misstate the profitability of a period. In the context of Easy Month End, properly handling accruals during the month-end close process ensures that all financial accounts are accurate and ready for reporting.