Which transaction is most likely to be recorded differently under cash-basis accounting than under accrual-basis accounting?
Correct answer: B. Payment of an expense incurred earlier
- A. Purchase of equipment for immediate cash
- B. Payment of an expense incurred earlier
- C. Cash sale made on the same day
- D. Owner's cash investment
Explanation
Under cash basis, the expense is recorded when payment is made, whereas accrual basis records it when it is incurred. The other transactions occur with immediate cash recognition in both bases.
Last updated
About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
Practise Accounting Principles
50 free Accounting Principles MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Accounting questions like this
Accounting is on this paper prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for it.
Related questions
A business completes consulting work in March but receives payment in April. Under accrual accounting, in which month is the revenue recognised?
A business earns a profit and retains it in the business. What is the immediate effect on the accounting equation?
A business owner introduces cash into the business as additional investment. Which effect is recorded?
A business pays insurance for the next twelve months in advance. Under accrual accounting, the amount relating to future months is initially recorded as:
A business pays legal fees to defend an ordinary customer claim arising from its normal operations. These fees are generally classified as: