If the Accounting Profession Were to Replace the Accrual Basis

question 24

Essay

If the accounting profession were to replace the accrual basis of accounting with the cash basis,do you think that financial accounting fraud would increase or decrease? Defend your viewpoint.

---

Definitions:

Temporary Accounts

These are accounts that are closed at the end of each accounting period, including revenues, expenses, dividends, and income summary accounts, to prepare the company for a new accounting period.

Retained Earnings

The portion of net income not distributed as dividends but retained by the company to reinvest in its business or to pay debt.

Accounting Period

A specific duration of time for which financial statements are prepared, often annually, quarterly, or monthly, to measure financial performance.

Adjusted Trial Balance

An inventory of all accounts with their adjusted balances, utilized to compile financial statements.