Which of the following is an advantage of using a cash-based accounting system?
A) It accurately specifies a company's current cash position.
B) It is in compliance with GAAP standards.
C) It needs greater bookkeeping requirements.
D) It is a more sophisticated approach to accounting.
E) It provides a more accurate indication of the profitability of a business.

Question

Quizplus · Accepted Answer

A cash-based accounting system accurately specifies a company's current cash position, as it only records transactions when cash is received or paid out. This can be advantageous for small businesses or those with limited transactions, as it can provide a clear understanding of the company's cash flow. However, it may not provide an accurate indication of profitability or comply with GAAP standards. It also may not provide as much detail for financial reporting or analysis.

Which of the Following Is an Advantage of Using a Cash-Based