The System of Preparing Financial Statements Based on Recognizing Revenues

question 161

Multiple Choice

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

• A) Accrual basis accounting.
• B) Operating cycle accounting.
• C) Cash basis accounting.
• D) Revenue recognition accounting.
• E) Current basis accounting.

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Definitions:

Debts

Money that is owed or due, typically resulting from borrowing funds or purchasing goods and services on credit.

Taxes

Compulsory financial charges or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Income Statement

A financial document that reports a company's revenues, expenses, and profit over a specific period, showing its financial performance.

Cash Flow

The total amount of money being transferred into and out of a business, affecting its liquidity, operations, and financial health.