The cash basis of accounting does not match expenses with the revenues they help generate.

Question

Quizplus · Accepted Answer

The cash basis of accounting only records transactions when cash is received or paid out, regardless of when the revenue was earned or the expenses were incurred. Therefore, expenses and revenues are not matched in the period they were incurred or earned using the cash basis of accounting. This is a key difference from accrual accounting, which matches revenues and expenses to the period in which they were incurred or earned.

The Cash Basis of Accounting Does Not Match Expenses with the Revenues