What kind of accounting is accrual basis and captures costs and revenues and then applies them to the appropriate period?

• A. Proprietary or Financial Accounting
• B. Budgetary Accounting
• C. Cash Accounting
• D. Tax Accounting

Answer: (A)

Accrual basis accounting records revenues when they are earned and expenses when they are incurred, then assigns them to the period in which the economic activity occurred, regardless of when cash is received or paid. This approach is the defining feature of financial (proprietary) accounting, which reports the organization’s financial position and performance to external users. It contrasts with cash accounting, which only records transactions when cash moves; budgetary accounting, which tracks appropriations and spending against the budget; and tax accounting, which follows tax rules that may differ from financial reporting. For example, revenue from a service is recognized in the period the service is performed, even if the customer pays later.