Question

Accrual basis accounting differs from cash basis accounting in that accrual basis accounting records ______. (Select all that apply.)

a. Revenues in the period when the revenue is earned, even though the cash has not yet been collected.
b. Expenses in the period incurred, even though cash has not yet been paid
c. Revenues in the period when the revenue is earned, when the cash has been collected.
d. Expenses in the period incurred, when the cash has been paid

Answer 1

Answer:

The correct answer is letter "A" and "B": Revenues in the period when the revenue is earned, even though the cash has not yet been collected. Expenses in the period incurred, even though cash has not yet been paid.

Explanation:

The cash basis accounting method recognizes revenue and expenses when they are realized -when the money is received or given away. On the other hand, the accrual basis accounting method recognizes revenue when it is earned and expenses when they are billed even if they have not been paid yet.