Question

Which statements about the accrual-based method are true?

A) It records revenue when cash is received.
B) It matches expenses with the period in which they are incurred.
C) It is primarily used for tax purposes.
D) It does not consider accounts receivable.

Answer 1

The accrual-based method records revenue when it is earned and matches expenses with the period in which they are incurred. It is primarily used for financial reporting.

Step-by-step explanation:

The accrual-based method is an accounting method that records revenue when it is earned, regardless of when the cash is received, and matches expenses with the period in which they are incurred. Therefore, statements B) and D) are true.

Statement A) is incorrect because the accrual-based method does not record revenue only when cash is received, but when it is earned. Statement C) is also incorrect because the accrual-based method is primarily used for financial reporting and not specifically for tax purposes.