Which of the following regarding accrual versus cash-basis accounting is true?
A) The FASB believes that the cash basis is appropriate for some smaller companies,especially those in the service industry.
B) The cash basis is less useful in predicting the timing and amounts of future cash flows of an enterprise.
C) Application of the cash basis results in an income statement reporting only revenues.
D) The cash basis requires a complete set of double-entry records.

Question

Quizplus · Accepted Answer

Accrual basis accounting provides a more accurate and comprehensive picture of a company's financial performance as it reflects revenues and expenses in the period in which they are earned or incurred, regardless of when cash is received or paid. This method provides a better indication of the timing and amounts of future cash flows. The FASB requires all publicly traded companies to use accrual basis accounting. Choice A is incorrect because the FASB does not believe cash basis accounting is appropriate for publicly traded companies. Choice C is incorrect because the accrual basis of accounting reflects both revenues and expenses. Choice D is incorrect because the cash basis of accounting does not require double-entry records.

Which of the Following Regarding Accrual Versus Cash-Basis Accounting Is