CFE – Financial Transactions and Fraud Schemes — Question 48

Which of the following is TRUE regarding accrual-basis accounting?

Answer options

• A. Expenses are recorded in the accounting system as soon as they are paid.
• B. The accrual method focuses on tracking a company’s current cash flow.
• C. Revenues are generally recognized when services are rendered to a customer.
• D. Accrual-basis accounting is simpler to use than cash-basis accounting.

Correct answer: B

Explanation

The correct answer is B because accrual-basis accounting focuses on recognizing revenues and expenses when they occur, not when cash is exchanged. Option A is incorrect as expenses are recorded when incurred, not when paid. Option C is misleading since revenues are recognized when earned, not specifically when services are rendered. Option D is false; cash-basis accounting is generally considered simpler due to fewer complexities.