The cash basis of accounting records revenues and expenses when the cash is exchanged, while the accrual basis of accounting
A) records revenues when they are earned and expenses when they are paid
B) records revenues and expenses when they are incurred
C) records revenues when cash is received and expenses when they are incurred
D) records revenues and expenses when the company needs to apply for a loan

Question

Quizplus · Accepted Answer

The accrual basis of accounting records revenues and expenses when they are incurred, regardless of when the cash is exchanged. This provides a more accurate representation of a company's financial position, as it reflects all transactions, including those that have not yet resulted in cash inflows or outflows. In contrast, the cash basis of accounting only records transactions when the cash is actually received or paid, which can result in inaccurate financial statements.

The Cash Basis of Accounting Records Revenues and Expenses When