Why do accrual-basis financial statements provide more useful information than cash-basis statements?
4. Information presented on an accrual
basis is more useful than on a cash basis because it reveals relationships that
are likely to be important in predicting future results. To illustrate, under
accrual accounting, revenues are recognized when the performance obligation is
satisfied so they can be related to the economic environment in which they
occur. Trends in revenues are thus more meaningful.
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