Question

multiple select question
select all that apply
which of the following statements describes why accrual accounting better reflects a businesss performance? choose every correct answer.
it provides a better focus and understanding of how cash is spent and why it is received.
revenues are always recorded in the period in which they are earned.
comparability of financial statements is improved.
expenses are always recognized in the period in which they are incurred.
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Explanation:

Step1: Eliminate cash-focused option

Cash flow tracking is the focus of cash-basis accounting, not accrual accounting, so the first statement is incorrect.

Step2: Verify revenue recognition rule

Accrual accounting follows the revenue recognition principle: $\text{Revenues recorded when earned}$, matching the second statement.

Step3: Confirm financial statement comparability

Accrual accounting uses consistent period-based recognition, so $\text{Financial statement comparability improves}$, matching the third statement.

Step4: Verify expense recognition rule

Accrual accounting follows the matching principle: $\text{Expenses recognized when incurred}$, matching the fourth statement.

Answer:

B. Revenues are always recorded in the period in which they are earned.
C. Comparability of financial statements is improved.
D. Expenses are always recognized in the period in which they are incurred.