Cash basis accounting measures financial performance very well when a business sells its customers on account.
BT: Knowledge

Question

Quizplus · Accepted Answer

This statement is actually false. Cash basis accounting only records transactions when cash is received or paid, and does not take into account money owed or owed to the business through accounts receivable or payable. Therefore, it may not accurately reflect a business's financial performance in situations where customers purchase on account. Accrual basis accounting is better suited for these situations as it records transactions when they are incurred, regardless of when cash is exchanged.

Cash Basis Accounting Measures Financial Performance Very Well When a Business