Which of the following accounting methods is typically used for inventory when business transactions are primarily conducted on a cash basis? A) Accrual Method B) Hybrid Method C)... Which of the following accounting methods is typically used for inventory when business transactions are primarily conducted on a cash basis? A) Accrual Method B) Hybrid Method C) Modified Accrual Method D) Cash Method
Understand the Problem
The question is asking to identify the accounting method that is most commonly used for inventory in businesses that primarily make cash transactions. The options provided give different accounting methods that can be analyzed to determine the correct answer.
Answer
Cash Method
The final answer is D) Cash Method
Answer for screen readers
The final answer is D) Cash Method
More Information
Cash basis accounting is typically used for simplicity and is common among small businesses, especially when transactions are conducted primarily in cash. Unlike accrual accounting, it records revenue and expenses only when cash is received or paid.
Tips
A common mistake is assuming that inventory must always be valued using the accrual method. However, for simplicity, businesses operating on a cash basis may use the cash method for inventory.
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