Accounting · Accounting Principles
Which of the following statements correctly distinguishes between the cash basis and accrual basis of accounting?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both cash basis and accrual basis record transactions only when cash is received.
- 2Cash basis records transactions only on receipt or payment of cash, while accrual basis records transactions when they are earned or incurred.✓
- 3Accrual basis records transactions only when cash is exchanged, while cash basis records them when incurred.
- 4Cash basis records transactions when they are earned, while accrual basis records them when cash is received or paid.
Correct answer
Cash basis records transactions only on receipt or payment of cash, while accrual basis records transactions when they are earned or incurred.
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