The accrual basis of accounting:

A) Is generally accepted for external reporting because it is more useful than cash basis for most business decisions.
B) Is flawed because it gives complete information about cash flows.
C) Recognizes revenues when received in cash.
D) Recognizes expenses when paid in cash.
E) Eliminates the need for adjusting entries at the end of each period.

Accrual Basis

This accounting method records income and expenses when they are earned or incurred, regardless of when cash transactions occur.

Cash Basis

An accounting method where revenues and expenses are recorded when cash is received or paid, respectively.

External Reporting

The process of providing financial statements and other pertinent information to outside entities, such as investors, creditors, and regulatory agencies.