When an organization uses the accounting method, it will be a better indicator of future cash flows and overall performance than using current cash receipts and disbursements.

Accrual accounting

Explanation:

Accrual Accounting is an accounting method in which expenses and revenues are recorded when a transaction is made, with or without payment or cash exchange. It is an expense or revenue record entry that occurs in the absence of payment or cash transaction. In other words, product or service transaction is recorded as they occur, in the account books even if the product or the service has not been paid for.

Accrual Accounting differs from cash accounting, cash accounting is an accounting method in which expenses and revenues are recorded in the account books only when payment or cash transaction has been made.

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