The purpose of the accrual basis of accounting is to:
A) report revenue when received.
B) improve the matching of revenue and expense in the proper period.
C) report expenses when cash disbursements are made.
D) improve the company's earnings per share.

Question

Quizplus · Accepted Answer

The accrual basis of accounting records revenue when it is earned (not necessarily when it is received) and expenses when they are incurred (not necessarily when cash is paid). This helps to improve the matching of revenue and expense in the proper period. This method provides a more accurate picture of a company's financial position and performance than the cash basis of accounting, which records revenue and expenses only when cash is exchanged. The purpose of the accrual basis is to provide a better representation of a company's financial position and performance over a given period. Improving earnings per share is not the main purpose of the accrual basis of accounting.

The Purpose of the Accrual Basis of Accounting Is To