Under the cash basis of accounting, there are two defects-one on the balance sheet and one on the income statement.

Question

Quizplus · Accepted Answer

Under the cash basis of accounting, the balance sheet does not show accounts receivable or accounts payable, leading to a defect in the balance sheet. Additionally, the income statement may not accurately reflect the company's profitability due to the timing of cash flow rather than revenue recognition.

Under the Cash Basis of Accounting, There Are Two Defects-One