Why is the cash basis of accounting not appropriate for use by publicly traded corporations?
A)the OSC (Ontario Securities Commission)does not allow its use
B)no assets or liabilities other than cash would ever appear on the statement of financial position,giving a distorted picture of financial position
C)the profit reported could not be distorted if a large customer paid for goods in advance or we postponed paying for goods or services until the next accounting period
D)the cash basis is not permitted for tax purposes

Question

Quizplus · Accepted Answer

The cash basis of accounting only takes into account cash transactions and does not consider any assets or liabilities other than cash. This means that it would not give a clear and accurate picture of a publicly traded corporation's financial position. As such, such corporations must use accrual basis accounting, which accounts for all assets and liabilities.

Why Is the Cash Basis of Accounting Not Appropriate for Use