Which statement is correct? The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received. The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles. 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 cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received.

Explanation:

In accounting there are two methods used to record transactions. There is the accrual method that records transactions where expense is incurred and revenue is earned, but it is not necessary that cash has been spent or received. For example if wages are outstanding bfor a half month and financial statement is written. It will recognise the amount we should have paid to date of salary even if we have not paid anyone (that is wages payable).

On the other hand cash basis accounting is where transactions are recorded only when cash has been received or spent. For example a revenue is recognised when it is collected.

This is a more obejective approach as it recognises what the business actually gets while in accrual accounting from an accounts receivable big $100,000 the business may eventually get only $70,000. This is not as objective as cash basis.