Homework Answers
The correct answer is OPTION B i.e Accural accounting records revenue only when it is earned.
OR
The true of accural basis accounting is that accrual accounting records revenue only when it is earned.
Explanation
The following which is true about the accrual basis accounting is that
- Accrual basis of accounting records revenue only when it is earned.
This is because accural accounting is done where the expenses and incomes are recorded when they are earned regardless when they are in received. This accounting is cash absence accounting. Also this accounting methods follows the matching principle.
Now this statement that accrual basis accounting is not allowed under GAAP is false. This is because GAAP only allows one accounting method, which is accrual basis accounting method.
Also, the statement that cash basis accounting records all the transactions is false. This is because cash basis accounting records only cash transactions not all transactions.
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