This accounting principle requires companies to use the accrual principle of accounting. The accounting method by which revenue is recognized in the income statement when it is earned (rather than when cash is received). The balance sheet is also affected at the time of revenues by an increase in liquidity (if the service or sale was in cash), by an increase in accounts receivable (if the service was performed on credit) or by a decrease in non-cash revenues. acquired. (if the service was performed after the customer had paid for the service in advance). Under the accrual accounting principle, expenses are matched to revenue on the income statement when expenses expire or title is transferred to the buyer, rather than when expenses are paid. At the time of the expense, the balance sheet is also affected by a decrease in liquidity (if the expense was paid at the time it was incurred), by an increase in accounts payable (if the expense will be paid in the future) or by a decrease of prepaid expenses (if the expense has been paid).