Accrual accounting is used because
A) cash flows are considered less important.
B) it provides a better indication of ability to generate cash flows than the cash basis.
C) it recognizes revenues when cash is received and expenses when cash is paid.
D) None of these answers are correct.

Question

Quizplus · Accepted Answer

Accrual accounting provides a better indication of ability to generate cash flows than the cash basis. This is because accrual accounting records revenues and expenses when they are incurred, regardless of when the cash is actually received or paid out. This gives a more accurate picture of a company's financial performance and financial position.

Accrual Accounting Is Used Because