Which statement about accrual accounting is true?
A) An adjusting entry always involves two statement of financial position accounts.
B) Revenue received before it is earned and expenses paid before being used or consumed are both initially recorded as liabilities.
C) The difference between revenue received in advance and accrued revenue is that accrued revenue has been recorded and needs adjusting whereas revenue received in advance has never been recorded.
D) None; all statements are false.

Question

Quizplus · Accepted Answer

Adjusting entries are required before financial statements are prepared because of timing differences between when revenues are earned and the related cash is received and when expenses are incurred and the related cash is paid.

Which Statement About Accrual Accounting Is True