The major distinction between cash-basis and accrual-basis accounting is that the
A) cash method is easier to use.
B) cash method matches revenue and expenses better.
C) point of recognition of revenue and expenses is different.
D) cash method involves less record keeping.

Question

Quizplus · Accepted Answer

The major distinction between cash-basis and accrual-basis accounting is that the point of recognition of revenue and expenses is different. In cash-basis accounting, revenue and expenses are recognized only when cash is received or paid, whereas in accrual-basis accounting, revenue and expenses are recognized when they are earned or incurred, regardless of when the cash is received or paid. This makes accrual-basis accounting more accurate in matching revenue and expenses and provides a better overall picture of a company's financial health.

The Major Distinction Between Cash-Basis and Accrual-Basis Accounting Is That