The accrual method of accounting may present difficulties for investors comparing firms using EPS.

Question

Quizplus · Accepted Answer

The accrual method of accounting recognizes revenues and expenses when they are incurred, not necessarily when cash is exchanged. This can lead to differences in reported earnings per share (EPS) among firms, making comparisons more challenging for investors, especially if different firms recognize revenues and expenses at different times for similar transactions.

The Accrual Method of Accounting May Present Difficulties for Investors