Even Though GAAP Requires the Accrual Basis of Accounting, Some

question 29

True/False

Even though GAAP requires the accrual basis of accounting, some businesses prefer using the cash basis of accounting.

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Definitions:

Liability

An obligation a company owes to others, such as loans, accounts payable, or mortgages, which must be settled over time through the transfer of economic benefits.

Future Outflow

Projected cash payments or disbursements that a business expects to incur as a result of current operations or future activities.

Resources

Resources are materials, energy, services, staff, or other assets that are utilized to produce goods and services, effectively supporting business operations.

External Users

Individuals or entities outside a company, such as investors, creditors, regulators, and customers, who use the company's financial information to make decisions.