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Which of the following statements about cash basis accounting and accrual basis accounting is correct? Multiple Choice
a. Net income is always larger under accrual basis accounting than cash basis accounting.
b. Accrual basis accounting and cash basis accounting will always produce the same amount of net income.
c. GAAP does not require the use of accrual basis accounting for external reporting.
d. Accrual basis accounting provides a better measure of operating performance than cash basis accounting.

Respuesta :

Answer:

d. Accrual basis accounting provides a better measure of operating performance than cash basis accounting.

Explanation:

Accrual basis accounts for the transactions related to the transactions of the company during the period and related to the period, whereas anything which only involves cash inflow or outflow is only reported under cash system.

Therefore, accrual basis is more transparent and logical in realizing and computing the net income, and analyzing the performance of the company.

Therefore, correct answer is statement d.

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