Salesforce Certified Nonprofit Cloud Consultant

In cash accounting, income and expenses are recorded when:

1. They are pledged

2. They are accrued

3. They are received or paid

4. They are billed

The correct answer is: They are received or paid

In cash accounting, income and expenses are recognized when cash is actually received or paid. This means that revenue is recorded at the moment the cash is received from a donor or client, and expenses are recorded when cash is disbursed to pay for goods or services. This method aligns with the principle of recording financial transactions based on cash flow, rather than when a transaction is agreed upon or invoiced, which is the practice in accrual accounting. This distinction is crucial for organizations, particularly in the nonprofit sector, as it impacts the timing of financial reporting and the understanding of their cash position. By using cash accounting, nonprofits can maintain a clear view of the funds available at any given time, as the revenues and expenses are directly tied to actual cash transactions.