What accounting method records transactions when cash is received or paid?

The choice of cash-basis accounting is appropriate because this method recognizes and records transactions only when cash is actually exchanged. This means that revenue is recorded when cash is received from customers, and expenses are recorded when cash is paid out to suppliers or for services. This approach is straightforward and reflects the actual cash flow of the business, making it easier for small businesses or individuals to track their finances without needing to consider receivables or payables.

In contrast, accrual accounting records transactions when they are earned or incurred, regardless of whether cash has been exchanged. Financial accounting focuses on the organization and presentation of financial statements to external parties, while managerial accounting relates to internal financial analysis and decision-making. These methods do not specifically account for cash transactions in the way that cash-basis accounting does, further emphasizing why cash-basis is the correct answer.