Question

A major difference between the cash method of business accounting and the "accrual" method of business accounting that under the cash method, income will be charged to the year in which it is collected whereas with the accrual method business income will be assigned to the year in which it is earned, even if collected in a later year.

A) True
B) False

Answer 1

Under the cash method of business accounting, income is charged to the year it is collected, while under the accrual method, income is assigned to the year it is earned.

Step-by-step explanation:

The major difference between the cash method of business accounting and the accrual method of business accounting is that under the cash method, income is recognized or charged to the year in which it is collected. On the other hand, with the accrual method, business income is recognized or assigned to the year in which it is earned, even if collected in a later year.