Generally accepted accounting principles (GAAP) require that the financial statements of all publicly traded companies be reported using accrual-basis accounting. What is a correct description of accrual accounting?

Recording the amount of revenues and the amount of expenses when budgets are approved and adopted

Recording revenues and expenses when earned or incurred, not when cash is received or paid

Recording the amount of revenues and the amount of expenses when cash is received or paid

Recording the amount of revenues and the amount of expenses when process cycles are complete