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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Under the cash basis of accounting, which of the following statements is true?

  1. a. Revenue is recorded when it is earned, regardless of when the cash is received.
  2. b. Expenses are recorded when they are paid.
  3. c. Expenses are recorded when they are incurred, regardless of when the cash is paid.
  4. d. The cash basis of accounting is allowed for all corporations.

To determine

Find the correct option, the option that indicates the statement that is true for cash basis accounting.

Explanation

Cash basis accounting: The method of accounting which recognizes revenues when they are received, and recognizes expenses when they are paid, is referred to as cash basis accounting.

Justification for correct answer: Under cash basis accounting, expenses are recognized when the cash is paid. Hence, option (b) is correct.

Justification for incorrect answers:

  • Option (a) is incorrect because reven...

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