Why would the accrual basis of accounting be preferable to the cash basis?
A)it is easier to keep records on the accrual basis than on the cash basis
B)it measures performance by comparing inflows and outflows of cash
C)it ignores the effect of the consumption of assets on the cost of doing business
D)it measures performance by comparing revenues earned with expenses incurred.

Question

Quizplus · Accepted Answer

The accrual basis of accounting measures the financial performance of a business by comparing revenues earned with expenses incurred during a specific period, regardless of when the cash was actually received or paid. This allows for a more accurate assessment of the profitability and financial health of the business. The cash basis, on the other hand, only looks at the inflows and outflows of cash, disregarding the timing of actual transactions and potentially leading to misleading financial statements.

Why Would the Accrual Basis of Accounting Be Preferable to the Cash