Which basis would recognize revenue when cash is received?

Which basis would recognize revenue when cash is received?

• A. Accrual basis accounting
• B. Cash basis accounting
• C. Hybrid basis accounting
• D. None of the above

Answer: (B)

Cash basis accounting recognizes revenue when cash is received. This approach records revenue only at the moment the payment arrives, so the timing of cash inflows directly drives when revenue appears on the books. In contrast, accrual basis accounting records revenue when it is earned—when the service is performed or goods are delivered—regardless of whether cash has been collected yet, which is why it reflects a different timing for recognizing revenue. A hybrid basis combines elements of both methods but doesn’t change the fundamental rule that cash basis recognizes revenue at receipt.

Cash basis accounting recognizes revenue when cash is received. This approach records revenue only at the moment the payment arrives, so the timing of cash inflows directly drives when revenue appears on the books. In contrast, accrual basis accounting records revenue when it is earned—when the service is performed or goods are delivered—regardless of whether cash has been collected yet, which is why it reflects a different timing for recognizing revenue. A hybrid basis combines elements of both methods but doesn’t change the fundamental rule that cash basis recognizes revenue at receipt.