financial statements are prepared using accrual basis of accounting because if we use cash basis accounting then we will miss most of the transaction as always we do not pay the expense and receive cash from the customer. Cash basis accounting say that we will record transaction when we will receive cash from the customer or pay cash for the expense. On the other hand accrual basis accounting say that we will record revenue when it is earned and expense will be recorded when it make revenue. And GAAP also not support the cash basis accounting for financial statement.