Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

What does cash basis accounting specifically focus on?

1. Accrued revenue and expenses

2. Future financial forecasting

3. Realized cash flows only

4. Depreciation schedules

The correct answer is: Realized cash flows only

Cash basis accounting specifically focuses on realized cash flows, meaning it records revenues and expenses only when cash is actually received or paid. This accounting method provides a straightforward view of a company’s cash position by tracking the movement of actual cash, allowing for a clear understanding of how much cash is available at any given time. Options that address accrued revenue and expenses relate to a different accounting method known as accrual accounting, which recognizes economic events regardless of when cash transactions occur. Future financial forecasting is generally more associated with predictive analytics and budgeting rather than the immediate cash flow aspects that cash basis accounting emphasizes. Depreciation schedules are related to the allocation of the cost of tangible assets over their useful lives, which is also not a focus of cash basis accounting as it does not account for non-cash expenses.