Accrual accounting provides some ethical challenges that cash accounting avoids.

Question

Quizplus · Accepted Answer

Accrual accounting recognizes revenue and expenses when they are earned or incurred, regardless of when payment is actually received or made. This can create ethical challenges such as the temptation to manipulate earnings by recognizing revenue or deferring expenses, or to delay payment of expenses to boost short-term profits. Cash accounting, on the other hand, only recognizes revenue and expenses when cash is actually received or paid, which can reduce some of these ethical challenges.

Accrual Accounting Provides Some Ethical Challenges That Cash Accounting Avoids