The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

A) Accrual basis accounting.
B) Operating cycle accounting.
C) Cash basis accounting.
D) Revenue recognition accounting.
E) Current basis accounting.

Cash Basis Accounting

A method of accounting where transactions are recorded when cash is actually received or paid, rather than when it is earned or incurred.

Accrual Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

Revenue Recognition

Revenue recognition is the accounting principle governing when revenue is considered earned and can be recorded.