The accrual basis of accounting

Question

Quizplus · Accepted Answer

The accrual basis of accounting recognizes revenues when earned and expenses when incurred, regardless of when cash is received or paid. It is generally accepted for external financial reporting because it provides more useful information about a company's financial performance and position than the cash basis of accounting. Adjusting entries are necessary under the accrual basis to ensure that all revenues and expenses are properly recognized in the period they relate to.

The Accrual Basis of Accounting