Question

The cash basis method of accounting requires revenue to be recognized when performance obligations are satisfied. (If false, identify error and correct.)

A. True
B. False

Answer 1

True

Step-by-step explanation:

Unlike Accrual basis accounting the cash basis method of accounting requires revenue to be recognized when performance obligations are settled rather than when they are incurred.

The major difference between cash and accrual accounting is in the timing of when transactions are taken account of. Whereas Accrual accounting recognizes transactions when they occur (i.e. expenses when they are incurred and revenue when they are earned) Cash accounting recognizes revenue and expenses only when cash is paid.