Accrual basis accounting helps guide business decisions because it accounts for expected future receipts and payments.

• A. It records only cash transactions
• B. It ignores future cashflows
• C. It accounts for expected future receipts and payments
• D. It only records expenses

Answer: (C)

Accrual basis accounting records transactions when they are earned or incurred, not when cash is received or paid. This approach recognizes expected future receipts and payments through items like accounts receivable and accounts payable, as well as accruals and deferrals, giving a fuller picture of a period’s activities. Because of this timing, it provides decision-useful information about profitability and obligations, reflecting what the business expects to collect and owe in the near term and beyond. That’s why the statement that it accounts for expected future receipts and payments is the best description. Cash-only methods focus solely on actual cash flows and miss these anticipated items, while other choices don’t capture the broader recognition of future inflows and outflows.