Final answer:
The accrual basis of accounting is built on the revenue recognition principle, which records revenue when earned, and the matching principle, which matches expenses to the revenues they help generate, both recorded in the period they occur.
Step-by-step explanation:
The accrual basis of accounting is founded on two key principles: the revenue recognition principle and the matching principle. The revenue recognition principle dictates that revenue should be recognized and recorded when it is earned, regardless of when cash is actually received. Conversely, the matching principle requires that expenses be matched to the revenue they help to generate, and recorded in the same period that the revenue is recognized, regardless of when the payment for the expenses is made.
These principles aim to provide a more accurate picture of a company's financial performance and position, by recording transactions when they actually occur. This method contrasts with the cash basis of accounting, where revenue and expenses are recorded only when cash is exchanged.