The Key Differences Between the Cash Basis and Accrual Basis

question 100

True/False

The key differences between the cash basis and accrual basis of accounting can be explained by understanding the time period concept and the revenue recognition and matching principles.

---

Definitions:

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal, typically on an annual basis.

Discount Rate

Within DCF analysis, it's the rate employed to compute the present economic value of expected future cash inflows.

Present Value

The current value of a future sum of money or stream of cash flows, discounted at a specific interest rate.

Compound Rate

The rate at which interest on an investment or loan is calculated on both the initial principal and the accumulated interest from previous periods.