What type of accounting is applied when a credit is earned?

Accrual accounting is the correct choice because it recognizes revenue when it is earned, regardless of when cash is actually received. This method adheres to the principle of recognizing economic events in the financial statements as they occur, allowing for a more accurate reflection of a company's financial position. For instance, if a service is provided or a product is delivered, the revenue is recorded at that moment, even if the payment is not received until a later date. This approach contrasts with cash basis accounting, which only recognizes revenue when cash is received and expenses when they are paid, making accrual accounting more suitable for businesses that need to track their financial performance over time.

In comparison, double-entry accounting refers to a system that records every transaction in at least two accounts and is not specifically about when credit is recognized or earned. Project-based accounting focuses on tracking revenues and expenses related to specific projects, which may or may not align with the timing of earning credits.