Although the accrual basis accounting system may require additional analysis to determine a business's actual cash position, it provides a more accurate measure of profitability.

Question

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The accrual basis accounting system records revenue and expenses when they are earned or incurred, regardless of when cash is received or paid. This provides a more accurate measure of profitability as it matches revenue with the expenses incurred in generating that revenue. However, it may not reflect the actual cash position of the business, which requires additional analysis.

Although the Accrual Basis Accounting System May Require Additional Analysis