Which of the following is a key advantage of accrual accounting over cash accounting?

Accrual accounting is designed to provide a more accurate picture of a company's financial status by recognizing revenue when it is earned and expenses when they are incurred, regardless of when the cash is actually received or paid. This alignment of revenue and expenses in the appropriate period is a fundamental principle that leads to better matching of income with the costs associated with generating that income. As a result, businesses can better assess their financial performance over specific periods, which aids in making informed financial decisions and provides stakeholders with a clearer understanding of the company’s profitability and operational efficiency.

In contrast, other methods, such as cash accounting, may not reflect a company’s financial status accurately since revenues and expenses are recorded only when cash changes hands. This can lead to situations where the financial results appear misleading, especially if significant transactions occur just before or after a reporting period. Hence, accrual accounting's ability to align income and expenses enhances transparency and provides a more comprehensive view of financial health.