The Major Distinction Between Cash-Basis and Accrual-Basis Accounting Is That

question 25

Multiple Choice

The major distinction between cash-basis and accrual-basis accounting is that the

• A) cash method is easier to use.
• B) cash method matches revenue and expenses better.
• C) point of recognition of revenue and expenses is different.
• D) cash method involves less record keeping.

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Definitions:

Fixed Expenses

Costs that remain constant regardless of the level of production or business activity.

Sales

The total revenue generated from goods or services sold by a company during a specific period.

Residual Income

A measure of the excess profit that exceeds the required rate of return on investment.

Required Rate Of Return

The minimum return an investor expects to achieve by investing in a particular asset, reflecting the risk level of the investment.