Economics · Accounting Principles
Which statement is TRUE regarding the distinction between Accrual Basis and Cash Basis accounting?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The Cash Basis provides a more accurate picture of a company's financial position on the Balance Sheet.
- 2The Accrual Basis is required by most GAAP frameworks because it better measures performance by matching revenues and expenses.✓
- 3The Cash Basis is mandatory under IFRS, while the Accrual Basis is mandatory under US GAAP.
- 4The Accrual Basis only records credit transactions, whereas the Cash Basis records only cash transactions.
Correct answer
The Accrual Basis is required by most GAAP frameworks because it better measures performance by matching revenues and expenses.
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