Under cash accounting, when are income and expenditures recorded?

Under cash accounting, when are income and expenditures recorded?

• A. When the money changes hands
• B. When the obligation is incurred
• C. When the goods are delivered
• D. At the end of the period

Answer: (A)

Under cash accounting, income and expenditures are recorded when cash actually changes hands—income when cash is received and expenses when cash is paid. This method tracks the literal cash flow of the business, not the timing of when goods are delivered or obligations are incurred. In contrast to accrual accounting, there’s no recording for accounts receivable or payable until cash moves, so recognizing revenue or expenses happens only at the moment of payment or receipt. The timing isn’t tied to the end of a period, but to when cash is exchanged.

Under cash accounting, income and expenditures are recorded when cash actually changes hands—income when cash is received and expenses when cash is paid. This method tracks the literal cash flow of the business, not the timing of when goods are delivered or obligations are incurred. In contrast to accrual accounting, there’s no recording for accounts receivable or payable until cash moves, so recognizing revenue or expenses happens only at the moment of payment or receipt. The timing isn’t tied to the end of a period, but to when cash is exchanged.