The cash basis of accounting and the accrual basis of accounting result in the same measures of net income.

Question

Quizplus · Accepted Answer

The cash basis of accounting and the accrual basis of accounting can result in different measures of net income due to timing differences in recognizing revenue and expenses. Under the cash basis, revenue is recognized when cash is received and expenses are recognized when they are paid, while under the accrual basis, revenue is recognized when it is earned and expenses are recognized when they are incurred, regardless of whether or not cash has been exchanged.

The Cash Basis of Accounting and the Accrual Basis of Accounting