Business FinancesQuestion 1171 of 1605
Which record-keeping method records revenue when it is EARNED and expenses when they are INCURRED, regardless of when cash changes hands?
a.Petty-cash accounting
b.Cash-basis accounting
c.Single-entry only
d.Accrual-basis accounting
Explanation
Accrual accounting recognizes revenue when earned and expenses when incurred, matching them to the correct period even if cash is received or paid later. This gives a more accurate picture of profitability on long jobs than cash-basis accounting, which records only actual cash movements.
Practice all 1605 questions free — no signup required.
Related questions on this topic
- Under a Section 179 election, a small contractor may be able to:
- For how long should a contractor generally retain business and tax records to support filed returns and defend against audits?
- Accurate job-cost records are important primarily because they:
- Under cash-basis accounting, a contractor records income when:
- A city business license (business tax certificate) is:
- A building permit for a construction project is generally obtained from:
Last reviewed: · editorial process
Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)