A cash-based accounting system recognizes expenses as they are paid and recognizes revenue when it is generated.

Question

Quizplus · Accepted Answer

In cash-based accounting, revenue is recognized when cash is received, and expenses are recognized when cash is paid. This is in contrast to accrual-based accounting, which recognizes revenue and expenses when they are incurred or earned, regardless of when the cash is received or paid.

A Cash-Based Accounting System Recognizes Expenses as They Are Paid