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Question

Which of the following statements about the accrual basis of accounting is true?

A The accrual basis of accounting records financial transactions only when cash is received or paid out. Correct Answer Incorrect Answer
B The accrual basis of accounting records financial transactions when revenue is earned or expenses are incurred, regardless of when cash is received or paid out. Correct Answer Incorrect Answer
C The accrual basis of accounting records financial transactions when cash is received or paid out, regardless of when revenue is earned or expenses are incurred. Correct Answer Incorrect Answer
D The accrual basis of accounting is used exclusively by non-profit organizations. Correct Answer Incorrect Answer

Solution

Under the accrual basis of accounting, revenue is recognized when it is earned, regardless of whether or not cash has been received.

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