Q. 3-2RQ
Question
Which method of accounting (cash or accrual basis) is consistent with Generally Accepted Accounting Principles?
Step-by-Step Solution
Verified Answer
Accrual basis accounting is consistent with Generally Accepted Accounting Principles
1Explanation on Accrual Basis Accounting
Under accrual basis of accounting, revenues and expenses of the business are recorded when it earned or incurred by the entity. This method is accepted under GAAP.
2Explanation on Cash Basis Accounting
Under cash basis accounting, cash receipts and payments are used to record revenues and expenses for the entity. This method of accounting is not acceptable under GAAP.
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