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Getting the hang of accruals

Timing issues over revenue and expense recognition and cash movements underpin accounting, says CAI HAOXIANG

Imagine there is a mooncake seller, Lotus Limited, that sells the round pastries to two customers in September every year when the mid-Autumn festival typically occurs - PHOTO: SPH

ACCRUALS are one of the most important concepts that investors have to understand, if they are to read financial statements with a deeper level of understanding. Most accounting statements are based on the accrual, instead of the cash, system of accounting. In the latter, revenues and expenses