Asked by Angelica Serrano on May 10, 2024
Verified
Cash-basis accounting provides the most useful measure of future operating performance.
Operating Performance
A measure of a firm's efficiency in managing its core business operations, often evaluated using metrics such as operating margin and revenue growth.
- Grasp the effects of accrual accounting on earnings measurement and the potential incongruities with cash flow.
Verified Answer
TE
Tayler EnnisMay 12, 2024
Final Answer :
False
Explanation :
Cash-basis accounting only records transactions when cash is received or paid out. This can be misleading because it does not take into account future obligations or revenue that has been earned but not received yet. Accrual-basis accounting provides a more accurate picture of future operating performance by recognizing revenue and expenses when they are earned or incurred, regardless of when cash is received or paid out.
Learning Objectives
- Grasp the effects of accrual accounting on earnings measurement and the potential incongruities with cash flow.
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