In cash basis accounting, when are revenues reported as earned?

In cash basis accounting, revenues are reported as earned when cash is received. This method of accounting recognizes income only at the time funds are actually received from customers, regardless of when the services were performed or when goods were delivered. This approach helps track cash flow more accurately, as it aligns revenue recognition with the actual availability of cash, making it beneficial for small businesses and personal care homes that may operate on tight cash flows.

In contrast, other methods of revenue recognition, such as recognizing income when services are provided or when physical goods are shipped, can lead to discrepancies between reported income and actual cash on hand. This can create challenges for financial management, particularly if a business incurs expenses before receiving payment. Thus, the focus of cash basis accounting on the actual receipt of cash is what sets it apart and is considered the correct answer to the question.