Do the cash basis and accrual basis of accounting result in the same measures of net income?

• A. True
• B. False
• C. Sometimes True
• D. They measure the same outcome

Answer: (B)

Timing of recognition is the key idea. Cash basis records revenue and expenses only when cash actually moves, while accrual basis records them when earned or incurred, regardless of cash flow. Because of this difference, net income under the two methods generally differs. For example, revenue earned but not yet collected is counted in accrual income but not in cash-basis income; similarly, expenses incurred but not yet paid increase accrual income or expense in the current period, while the cash method would delay recognizing them. They would only yield the same net income if there were no timing differences—when cash receipts align exactly with revenue earned and cash payments align exactly with expenses incurred.