Question

current attempt in progress
under accrual - basis accounting
the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.
events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.
net income is calculated by matching cash outflows against cash inflows.
cash must be received before revenue is recognized.

Explanation:

To solve this, we analyze each option based on accrual - basis accounting principles:

• Option 1: Accrual - basis is not adjusted to cash - basis for GAAP financial statements. So this is incorrect.
• Option 2: Accrual - basis accounting recognizes events (revenues, expenses) in the period they occur, not when cash is paid or received. This matches the definition.
• Option 3: Matching cash outflows and inflows is cash - basis, not accrual - basis. So this is incorrect.
• Option 4: In accrual - basis, revenue can be recognized before cash is received (e.g., on account). So this is incorrect.

Answer:

B. events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.