The accrual principle is the concept of recognizing revenues and expenses when they incur. This means that both revenues and expenses are recorded in the accounting system when they happen instead of when payments are actually made. GAAP requires businesses to use the accrual method because it more accurately reflects the financial position of a company than the cash basis. For example, If you ignored the accrual principle, you would record an expense only when you paid for it, which might incorporate a lengthy delay caused by the payment terms for the associated supplier invoice.