Adjusting entries would not be necessary if the pure cash basis of accounting were followed (assuming no
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“Adjusting entries would not be necessary if the ‘pure’ cash basis of accounting were followed (assuming no mistakes were made in recording cash transactions as they occurred). Under the cash basis, receipts that are of a revenue nature are considered revenue when received, and expenditures that are of an expense nature are considered expenses when paid. It is the use of the accrual basis of accounting, where an effort is made to match expenses incurred against the revenues they create, that makes adjusting entries necessary.” Do you agree with this statement? Why?
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