Accounting · Accrual Accounting
Under accrual-based accounting, revenues and expenses are recognized when they are earned or incurred rather than merely when cash is received or paid. This principle is important mainly because it:
- 1Ensures that only realized cash profits are reported
- 2Records only tax-deductible items in books of account
- 3Presents a more realistic picture of financial performance for a given period✓
- 4Delays recognition of transactions until final settlement
Correct answer
Presents a more realistic picture of financial performance for a given period
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