Question

Accrual accounting is used because Group of answer choices cash flows are considered less important. it provides a better indication of ability to generate cash flows than the cash basis. it recognizes revenues when cash is received and expenses when cash is paid. none of these.

Answer 1

Answer:

The answer is B. it provides a better indication of ability to generate cash flows than the cash basis

Explanation:

Accrual basis of accounting is a method where revenue and expenses are recognized in the period the transaction occurs irrespective of whether cash is received or not at that period unlike cash basis accounting which recognizes revenue only when cash is received and payment only when cash is given out.

The importances are:

1. It gives an exact picture of the cash flow of the company

2.it provides a better indication of ability to generate cash flows than the cash basis