Which of the following is true about accrual basis accounting and cash basis accounting?
A)Net Income is generally larger under accrual basis accounting than cash basis accounting.
B)GAAP does not require accrual basis accounting be used for external reports.
C)Accrual basis accounting and cash basis accounting will always produce the same amount of net income.
D)Accrual basis accounting provides a better measure of operating performance than does cash basis accounting

Question

Quizplus · Accepted Answer

Accrual basis accounting provides a better measure of operating performance than does cash basis accounting, as it records revenue and expenses when they are earned/incurred, regardless of when they are received/paid, providing a more accurate picture of a company's profitability. The other options are false: A is generally true but not always, B is false as GAAP requires accrual basis accounting for external reporting, and C is false as the two methods can produce different net incomes.

Which of the Following Is True About Accrual Basis Accounting