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Which of the following statements about Accrual Accounting is correct? 1 point Accrual Accounting is simple but does not reflect economic reality. Accrual Accounting requires managers’ judgement and does not reflect economic reality. Accrual Accounting is simple and reflects economic reality. Accrual Accounting requires managers’ judgement and reflects economic reality. 6. Question 6 Employees of a firm a

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Answer:

The statements about Accrual Accounting that is correct is:

Accrual Accounting requires managers’ judgement and reflects economic reality.

Explanation:

Unlike the cash basis of accounting that records transactions when cash is exchanged, the accrual basis of accounting tries to reflect economic reality and events rather than the exchange of cash.  In this attempt, business transactions are recorded when they occur and in the period they occur and relate to rather than when cash is received or paid.  Therefore, professional judgement is required.  Many accounting estimates have to be made when using the accrual basis of accounting unlike the cash basis.

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