Why do we need accrual based accounting?

Question

Accepted Answer

Accrual based accounting provides a more accurate representation of a company's financial position by matching revenues with expenses.

Accrual accounting recognizes revenue and expenses when they are incurred, regardless of when cash is exchanged.
It provides a more accurate depiction of a company's financial health by matching revenues with expenses in the same accounting period.
Accrual accounting helps in better tracking of financial performance and enables better decision-making.
It complies with accounting standards and provides a more transparent view of a company's financial position to stakeholders.
Accrual accounting is required for publicly traded companies and provides a more comprehensive view of long-term financial health.

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