Understanding Accrual and Cash Basis Accounting

The video tutorial discusses two accounting methods: accrual and cash basis. Accrual accounting records revenues and expenses when they occur, regardless of cash flow, and is required by GAP for publicly traded companies. Cash basis accounting records transactions when cash is exchanged and is often used by smaller businesses. The video emphasizes the importance of understanding these methods for making adjustments in accounting.

Why is the accrual basis of accounting required by GAAP for publicly traded companies?

Under what circumstances can a business choose to use cash basis accounting?