The accrual basis of accounting recognizes:
A) revenues when cash is received and expenses when cash is paid.
B) revenues when earned and expenses when cash is paid.
C) revenues when cash is received and expenses when incurred.
D) revenues when earned and expenses when incurred.

Question

Quizplus · Accepted Answer

The accrual basis of accounting recognizes revenues when they are earned (regardless of when cash is received) and expenses when they are incurred (regardless of when cash is paid). This method provides a more accurate representation of a company's financial position because it matches revenue with the expenses that helped to generate it.

The Accrual Basis of Accounting Recognizes