The accrual basis method of accounting can be best described as:
A) The recording of transactions and adjustments so that debits equal credits.
B) The method that equates assets with liabilities and owners' equity.
C) The method that recognizes revenue when money is received.
D) The method that matches incurred expenses with related revenues when they are earned.

Question

Quizplus · Accepted Answer

The accrual basis method of accounting recognizes revenue when it is earned and matches it with related expenses incurred during the same period. This method ensures that the financial statements accurately portray the financial performance and position of a business. The recording of transactions and adjustments so that debits equal credits is a fundamental principle of accounting known as double-entry bookkeeping and is applicable to all accounting methods. Equating assets with liabilities and owners' equity is the fundamental accounting equation and also applies to all accounting methods. Recognizing revenue when money is received is the cash basis method of accounting, which is not widely used for financial reporting purposes.

The Accrual Basis Method of Accounting Can Be Best Described