Under which basis are effects of transactions recognized when they occur rather than when cash is exchanged?

The accruals basis of accounting recognizes the effects of transactions at the point they occur, regardless of when cash is exchanged. This means that revenues and expenses are recorded when they are earned or incurred, rather than when cash is received or paid. This approach provides a more accurate representation of a company’s financial position and performance, as it reflects all obligations and resources that have been committed during a period.

For example, if a company provides services in December but receives payment in January, under the accruals basis, the revenue from those services would still be recognized in December’s financial statements. This principle is fundamental to the preparation of financial statements that are in alignment with the underlying concept of matching income with expenses incurred to generate that income in the same period.

The other bases mentioned do not reflect this timing of recognition. The cash basis recognizes revenues and expenses solely when cash changes hands, while the going concern basis and the historical cost basis focus on different aspects of accounting and reporting rather than the timing of transaction recognition.