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Question: Why is the accrual basis of accounting generally preferred over the cash basis?

Question: Why is the accrual basis of accounting generally preferred over the cash basis?

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Expert Solution

Step-by-Step solution

Step 1: Definition of accrual basis

It is a system of accounting in which both cash and non-cash transactions are recognised.

Step 2: Reason for preference

The accrual basis of accounting is preferred over the cash basis because the accrual basis is more accurate as compared to the cash basis. Also, the big companies use the accrual basis mainly, while small businesses only use the cash basis

The accrual basis is more accurate.

Sahil Dangi answered 1 year ago
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