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It is false that under both accrual-basis and cash-basis accounting, all revenues and expenses are recorded at the same point in time.
What is accrual-basis accounting?
- In the world of finance, accrual refers to the process of accumulating interest or various investments together over time.
- When a transaction is documented as having occurred rather than when a payment is made or received, this accounting method is known as accrual accounting.
- According to the matching principle, income and expenses should be recorded in the same period, and this is how the approach operates.
- Any income made or expense incurred for which money has not yet been exchanged requires accruals.
- By including relevant information regarding recently extended short-term credit to consumers and upcoming liabilities owed to lenders, accruals enhance the quality of the information on financial statements.
Learn more about accrual accounting here:
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