1. Which of the following is not a potential benefit of accrual accounting, compared to cash-basis...
1. Which of the following is not a potential benefit
of accrual accounting, compared to cash-basis accounting?
Question options:
Timeliness.
Better reflecting economic activity.
Periodicity.
Better matching of revenues and expenses.
Homework Answers
Answer is Periodicity
Explanation:
Timelines,Better reflecting economic activity and Better matching of revenues and expenses having the potential benefit of accrual accounting, compared to cash-basis because of following reasons:
i.Timelines : Useful to the users of financial statements in their decision making process.
ii.Better reflecting economic activity: useful to separate business activities and personal activities.
iii.Better matching of revenues and expenses: Useful to recognize revenues and related expenses in the same accounting period.
But,
As per the Periodicity concept financial statement can be prepared yearly, quarterly and monthly .This can be done in Cash basis also. Hence Periodicity is not a potential benefit of accrual accounting, compared cash-basis accounting.
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