Accrual accounting is an integration of two key accounting principles: 1. the revenue recognition principle and2. the matching principle The revenue recognition principle mandates revenues to be recognized as they are earned or realized. As per the matching principle, expenses are to be recognized in the same period as the revenue that is generated from them. Accrual accounting helps in clearing the relationship between revenue and expense and offers a better insight into a company's profitability. This format of accounting allows companies to have a clearer picture of their asset and liability position as well. Therefore, accrual accounting is the only method permitted as per General Accepted Accounting Principles (GAAP). The Securities and Exchange Commission (SEC) also requires publicly traded companies to follow this principle for their accounting practices.