Which statement describes cash accounting in contrast to accrual accounting?

Which statement describes cash accounting in contrast to accrual accounting?

• A. Accrual accounting records transactions when revenue is earned.
• B. Cash accounting records transactions only when cash changes hands
• C. Accrual accounting records all revenues regardless of cash.
• D. Cash accounting records only receipts and payments, not accruals.

Answer: (D)

Cash accounting focuses on when cash actually moves. It records a transaction only when cash is received or paid, so revenue is noted at cash receipt and expenses at cash payment, with no recognition for non-cash timing. Accrual accounting, by contrast, records revenues when earned and expenses when incurred, regardless of cash flow. The statement that cash accounting records only receipts and payments, not accruals, directly captures this difference, making it the best description. The other wording is true in a sense, but the explicit exclusion of accruals clarifies the contrast.

Cash accounting focuses on when cash actually moves. It records a transaction only when cash is received or paid, so revenue is noted at cash receipt and expenses at cash payment, with no recognition for non-cash timing. Accrual accounting, by contrast, records revenues when earned and expenses when incurred, regardless of cash flow. The statement that cash accounting records only receipts and payments, not accruals, directly captures this difference, making it the best description. The other wording is true in a sense, but the explicit exclusion of accruals clarifies the contrast.