The cash basis of accounting, as a basis for measuring performance for a particular accounting period, has/have which of the following weakness(es)?
A)does not adequately match the cost of the efforts required to generate inflows with the inflows themselves
B)separates the recognition of revenue from the process of earning those revenues.
C)sensitive to the timing of cash expenditures
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The cash basis of accounting has all the weaknesses mentioned in the options. It does not match the cost of efforts with inflows, separates revenue recognition from the process of earning those revenues, and is sensitive to the timing of cash expenditures. These weaknesses limit the accuracy and usefulness of financial statements prepared using the cash basis of accounting.

The Cash Basis of Accounting, as a Basis for Measuring