Asked Nov 29, 2019

How are revenues and expenses reported on the income statement under (a) the cash basis of accounting and (b) the accrual basis of accounting?


Expert Answer

Step 1

Under the cash basis of accounting, revenues are recorded when a business receives cash or cash equivalents from their customers. Expenses are recorded when the business makes payment for the expenses incurred. Simple business uses the cash basis of accounting as it is simple to track the cash inflow and cash outflow.

Step 2

Under the accrual basis of accounting, revenues, and expenses are reported in the period of incurring them, rather than a payment made or received. Revenue i...

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