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Questions and Answers
Which method of accounting records revenue when cash is received and recognizes expenses when they are paid?
Which method of accounting records revenue when cash is received and recognizes expenses when they are paid?
- IFRS
- Cash basis of accounting (correct)
- Accrual basis of accounting
- GAAP
What is the primary difference between cash and accrual basis of accounting?
What is the primary difference between cash and accrual basis of accounting?
- The time frame in which revenues and expenses are reported (correct)
- The method suggested by GAAP and IFRS
- The number of transactions involved
- The complexity of the transactions
When is the accrual basis of accounting used?
When is the accrual basis of accounting used?
- When the entity has simple transactions
- When the entity wants to record cash inflows and outflows
- When the entity has numerous and complex transactions (correct)
- When the entity wants to record receivables and payables
Why is the accrual basis of accounting commonly used by businesses?
Why is the accrual basis of accounting commonly used by businesses?
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What does the cash basis of accounting record?
What does the cash basis of accounting record?
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