Accrual accounting is a method of recording financial transactions in which revenues and expenses are recognized as they are earned or incurred, regardless of when cash actually changes hands. In the context of construction, this means that revenues are recorded as soon as work is completed, even if payment has not yet been received. Similarly, expenses are recognized as soon as they are incurred, rather than when they are actually paid for. This allows for a more accurate representation of a construction company's financial position, as it provides a more realistic picture of the company's profitability and cash flow.Accrual accounting is particularly important in the construction industry, where projects can span months or even years and involve multiple phases of work. By using accrual accounting, construction companies can track