Question

Which of the following is the advantage of cash-based accounting?

Answer 1

Answer:

The correct answer to the following question will be Option A (it is more accurate than accrual accounting).

Explanation:

Cash-based accounting

• Cash accounting is a form of accounting where expenditure payments are reported during the time they are received, and expenditures are documented in the period they are paid in. In certain words, when cash is obtained and charged, the profits and expenditures are reported, respectively.
• There are definite advantages for relying on the cash accounting basis for tax purposes. This accounting guarantees that taxes on money not yet collected are not paid; this increases profitability and ensures that funding is available through tax expenditures.

Therefore, Option A defines the Cash-base accounting benefit.

Answer 2

A) it is more accurate than accrual accounting.