Which of the following statements is true about the cash basis of accounting?
A)It can distort reported profits.
B)It is the only acceptable method for external reporting.
C)It reports revenues when earned and expenses when incurred.
D)It is used when cash is paid at the same time as the cost is incurred,but is not used when cash is paid before the expense is incurred.

Question

Quizplus · Accepted Answer

The cash basis of accounting can distort reported profits because it only recognizes revenues when cash is received and expenses when cash is paid, regardless of when they were actually earned or incurred. This can result in distorted financial statements that do not accurately reflect the financial health of the organization.

Which of the Following Statements Is True About the Cash