The accrual basis of accounting offers a direct explanation of why a firm's liquidity, as reported on the balance sheet, has improved or worsened.

Name: The accrual basis of accounting offers a direct explanation of why a firm's liquidity, as reported on the balance sheet, has improved or worsened.
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The accrual basis of accounting records revenues and expenses when they are incurred, not when cash is exchanged, so it doesn't directly explain changes in liquidity, which is more related to cash flow.

The Accrual Basis of Accounting Offers a Direct Explanation of Why