Question

Reporting revenues only when cash is received and expenses only when cash is paid is called the basis of accounting. True or false?.

Answer 1

The term "cash basis of accounting" refers to only recording revenue upon receipt of cash and expense upon payment of cash.

The term "cash basis" refers to a significant accounting technique that records revenues and expenses at the time that money is received or spent. Contrast this with accrual accounting, which regardless of when cash is received or paid, recognizes income at the time the revenue is earned and records expenses when liabilities are incurred.

By whom is cash basis accounting used?

Financial reporting can be done using either cash accounting or accrual accounting. Cash accounting is a method used by sole proprietorships, small firms, and individuals to keep track of their income and expenses whenever money is exchanged.

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