Which statement is correct? As long as management is ethical, there are no problems with using the cash basis of accounting. As long as a company consistently uses the cash basis of accounting, generally accepted accounting principles allow its use. The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles. The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received.

Question

Business

Jose Williams

18 August, 01:29

Which statement is correct? As long as management is ethical, there are no problems with using the cash basis of accounting. As long as a company consistently uses the cash basis of accounting, generally accepted accounting principles allow its use. The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles. The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received.

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Answers (1)

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Adriel Brown · Answer 1

The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles.

Explanation:

Under the cash basis of accounting whenever cash is received the same is recorded in the book of accounts and whenever cash is paid the same is to be reported in the book of accounts. That means it deals with only cash transactions.

Moreover, it also violates the revenues recognition and the expenses recognition