The primary difference between accrual-basis and cash-basis accounting is: Multiple Choice O O Accrual-basis accounting is not part of generally accepted accounting principles (GAAP). Under accrual-basis accounting, an attempt is made to record economic events as they occur, regardless of when cash is received or paid. Cash-basis accounting is allowed for financial reporting purposes but not accrual-basis accounting. Adjusting entries are only a necessary part of cash-basis accounting.

The primary difference between accrual-basis and cash-basis accounting is: Multiple Choice O O Accrual-basis accounting is not part of generally accepted accounting principles (GAAP). Under accrual-basis accounting, an attempt is made to record economic events as they occur, regardless of when cash is received or paid. Cash-basis accounting is allowed for financial reporting purposes but not accrual-basis accounting. Adjusting entries are only a necessary part of cash-basis accounting.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter4: The Adjustment Process

Section: Chapter Questions

Problem 3MC: Revenues and expenses must be recorded in the accounting period in which they were earned or...

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Which of the following is not a criterion to recognize revenue under GAAP? A. The earnings process must be completed. B. A product or service must be provided. C. Cash must be collected. D. GAAP requires that the accrual basis accounting principle be used in the revenue recognition process.
Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. Accrual-basis accounting records both cash and noncash transactions when they occur. Generally accepted accounting principles require companies to use cash-basis accounting. The key elements of accrual-basis accounting are the revenue recognition principle, the expense recognition principle, and the historical cost principle.
Which of the following statements is false? A. Noncash activities should be reported in accrual basis financial statements. B. Net cash flow from operating activities relates to normal business operations. C. Net income usually equals net cash flow from operating activities. D. The statement of cash flows is an essential part of the basic financial statements.
What is the impact on the accounting equation when an accounts receivable is collected? A. both sides increase B. both sides decrease C. only the Asset side changes D. the total of neither side changes
Under the cash basis of accounting, which of the following statements is true? a. Revenue is recorded when it is earned, regardless of when the cash is received. b. Expenses are recorded when they are paid. c. Expenses are recorded when they are incurred, regardless of when the cash is paid. d. The cash basis of accounting is allowed for all corporations.
Which of the following sentences regarding the statement of cash flows is false? The statement of cash flows describes the companys cash receipts and cash payments for a period of time. The statement of cash flows reconciles the beginning and ending cash balances shown on the balance sheet. The statement of cash flows reports cash flows in three categories: cash flows from business activities, cash flows from investing activities, and cash flows from financing activities. The statement of cash flows may be used by creditors to asses the creditworthiness of a company.
Which of the following is true of accrual basis accounting and cash basis accounting? Accrual accounting records revenue only when it is earned. Accrual accounting is not allowed under GAAP. Cash basis accounting records all transactions. All of the above are true.
Which sentence is incorrect? Select one: a. Cash-basis accounting is not in accordance with generally accepted accounting principles. b. In the Accrual-Basis Accounting, expenses are recognized when incurred. c. In the Cash-Basis Accounting, Revenues recognized when cash is received. d. According to the GAAP in Accrual-Basis Accounting, companies recognize revenues when they record cash receipts for their services.
Which of the following statements reflects an accurate comparison of cash-basis versus accrual-basis accounting? The difference between cash-basis and accrual-basis accounting is a matter of timing. The matching principle applies, regardless of whether cash-basis or accrual-basis accounting is used. IFRS and ASPE both allow for use of either cash-basis or accrual-basis accounting. Net income will be the same regardless of whether cash-basis or accrual-basis accounting is used.
Which statement about accrual basis of accounting is incorrect? * A. Accrual accounting adheres to the matching principle.B. Accrual accounting ignores the timing of cash flows in the business.C. Under accrual basis, a deferral is a transaction that impacts cash before impacting the income statement.D. none of the above
True or False: Under the accrual accounting method, revenue is recognized when cash is received, regardless of when the goods or services are delivered.
Studying GAAP Accrual accounting. There is also cash-basis accounting which does not comply with GAAP. Distinguish between cash-basis accounting and accrual-basis accounting. Why is accrual-basis accounting acceptable for most businesses and the cash-basis unacceptable in the preparation of an income statement and a balance sheet?