What is the main principle behind accrual accounting?

The main principle behind accrual accounting is that revenue and expenses are recorded when they occur, regardless of when cash is received or paid. This means that transactions are recognized in the financial statements at the time they are earned or incurred, which provides a more accurate representation of a company's financial performance during a specific accounting period.

By adhering to this principle, businesses can better match revenues with the expenses incurred to generate those revenues, allowing for more effective tracking of profitability and performance over time. This approach helps stakeholders understand the true financial position of the entity, as it captures all relevant transactions rather than just those involving cash flow.

In contrast to this principle, some of the other options suggest methods that align more with cash accounting. For instance, recognizing revenue only when cash is received or recording expenses only at the time of cash payment does not provide a complete picture of financial activities and can lead to misleading financial statements. While estimating accruals can be part of the process, it does not encapsulate the main principle of accrual accounting, which is focused on when transactions take place rather than when cash changes hands.