Accounting Rate of Return is the only method used for analyzing capital investments that uses accrual basis accounting.

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Accounting Rate of Return (ARR) is a method of analyzing capital investments that uses accrual basis accounting to calculate the average net income generated by an investment divided by the initial investment cost. It is the only method that exclusively uses accrual basis accounting principles in its calculation. Other methods, such as Net Present Value and Internal Rate of Return, use a combination of accrual and cash basis accounting principles.

Accounting Rate of Return Is the Only Method Used for Analyzing