The _____ basis of accounting typically recognizes revenue when a firm sells goods (manufacturing and retailing firms) or renders services (service firms), and recognizes expenses in the period when the firm recognizes the revenues that the costs helped produce.
A)cash
B)accrual
C)funds flow
D)tax
E)none of the above

Question

Quizplus · Accepted Answer

The accrual basis of accounting recognizes revenue when it is earned, regardless of when payment is received, and recognizes expenses when they are incurred, regardless of when payment is made. This method of accounting provides a more accurate representation of a company's financial performance than the cash basis of accounting, which only recognizes revenue and expenses when cash is exchanged.

The _____ Basis of Accounting Typically Recognizes Revenue When a Firm