Cash basis accounting may not work well for businesses for which of the following reasons?
A) Purchasing supplies for cash may be too small in amount to record.
B) Businesses have too many cash transactions.
C) Businesses have too few cash transactions.
D) When credit is used for most transactions.

Question

Quizplus · Accepted Answer

When credit is used for most transactions, cash basis accounting would not accurately reflect the true financial state of the business. Cash basis accounting only records transactions when cash is received or paid, meaning that any transactions done on credit would not be reflected until the cash is actually received or paid, resulting in an inaccurate representation of the business's financial position.

Cash Basis Accounting May Not Work Well for Businesses for Which