Accrual accounting is used because

Question

Quizplus · Accepted Answer

Accrual accounting provides a more accurate picture of a company's ability to generate cash flows by recognizing revenues when they are earned and expenses when they are incurred, regardless of when cash is received or paid. The cash basis only recognizes revenues and expenses when cash is received or paid, respectively, which may not accurately reflect the company's financial performance. Option A is incorrect as cash flows are still important in accrual accounting. Option C is incorrect as accrual accounting recognizes revenues and expenses when they are earned/incurred, not when cash is received/paid. Option D is incorrect as Option B is the correct answer.

Accrual Accounting Is Used Because