The cash basis of accounting records revenues and expenses when the cash is exchanged while the accrual basis of accounting
A) records revenues when they are earned and expenses when they are paid
B) records revenues when they are earned and expenses when they are incurred
C) records revenues when cash is received and expenses when they are incurred
D) records revenues and expenses when the company needs to apply for a loan

Question

Quizplus · Accepted Answer

The accrual basis of accounting records revenues when they are earned, regardless of when they are received in cash, and records expenses when they are incurred, regardless of when they are paid in cash. This method gives a more accurate picture of a company's financial performance than the cash basis, which can be more subjective and less reflective of the company's actual profitability.

The Cash Basis of Accounting Records Revenues and Expenses When