Which of the following statements is true of accrual basis accounting?
A)Accrual basis accounting is allowed by Generally Accepted Accounting Principles (GAAP).
B)Accrual basis accounting records expenses only when cash has been paid for them.
C)Accrual basis accounting records revenue only when cash is received.
D)It always results in greater net income than cash basis accounting.

Question

Quizplus · Accepted Answer

Accrual basis accounting is allowed and preferred by Generally Accepted Accounting Principles (GAAP) because it provides a more accurate picture of a company's financial performance over time, matching revenue and expenses to the periods in which they were earned or incurred, rather than just when cash was received or paid out. B and C are incorrect statements, as accrual basis accounting records both revenue and expenses when they are earned or incurred, regardless of when cash is paid or received. D is also an incorrect statement, as the net income under accrual basis accounting can be either greater or lesser than cash basis accounting, depending on the specific transactions and timing of cash flows.

Which of the Following Statements Is True of Accrual Basis