The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:
A) Cash basis accounting.
B) Revenue recognition accounting.
C) Current basis accounting.
D) Accrual basis accounting.
E) Operating cycle accounting.

Question

Quizplus · Accepted Answer

The system described is the cash basis accounting method. This method only recognizes revenue when cash is received and expenses when cash is paid, regardless of when the actual transaction took place. It is simpler and less complex than the accrual basis accounting method.

The System of Preparing Financial Statements Based on Recognizing Revenues