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Unformatted text preview: Cash-basis accounting is when a company records revenue when they receive the cash. When the company pays cash out they record the expense. The cash basis seems to be very appealing because of its simplicity, but it usually produces misleading financial statements for some companies. Cash-basis accounting fails to record revenue that a company has earned but not received the cash. Cash-basis does not match expenses with earned revenues. Cash-basis accounting is not in accordance with generally accepted accounting principles (GAAP). Individuals and some small companies do use cash-basis accounting. The cash basis is justified for small businesses because they often have few receivables and payables....
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- Spring '09