When to record accrual expenses for my sole proprietorship - need clarification

The general rule for accrual accounting is that expenses should be recorded when they are incurred, not when they're paid. However, "incurred" typically means when you've actually received the goods/services or when you've become legally obligated to pay for them. In your case, simply deciding to purchase items in the future and setting aside money for them doesn't create an obligation or liability. You would typically record the expense when you place the order (creating a legal obligation) or when you receive the items, whichever comes first. Since you didn't place the order until February 2025, and you weren't legally committed to the purchase in 2024, those expenses technically belong in your 2025 books, not 2024. Just mentally allocating funds doesn't create the accounting event needed for recognition under accrual basis.

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I think there's a distinction here that might be important - were you just mentally planning to buy these items, or did you create some kind of formal purchase requisition in your accounting system? If you actually created internal documentation showing approval and commitment to purchase, some accountants might argue that's enough to recognize the expense.

This might be a dumb question, but if I'm on cash basis accounting does any of this even matter? I just record everything when money actually changes hands and it seems way simpler.