Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 4 - Accrual Accounting Concepts - Questions: 24

Answer

(a) The accrual basis of accounting includes the transaction / events, in the periods in which the events occur, even if cash was not exchanged. (b) In the cash basis of accounting, the revenue is recorded when cash is received.

Work Step by Step

(a) In the same way, under the accrual basis, companies records the expenses when incurred, even if cash was not paid. (b) They record the expenses only when cash is paid. The cash basis of accounting is prohibited under generally accepted principles (GAPP)
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