Which of the Following Is True About Accrual Basis Accounting

question 136

Multiple Choice

Which of the following is true about accrual basis accounting and cash basis accounting?

• A)Net Income is generally larger under accrual basis accounting than cash basis accounting.
• B)GAAP does not require accrual basis accounting be used for external reports.
• C)Accrual basis accounting and cash basis accounting will always produce the same amount of net income.
• D)Accrual basis accounting provides a better measure of operating performance than does cash basis accounting

---

Definitions:

Absolute Advantage

The ability of an entity to produce more of a good or service with the same amount of resources than another entity.

Opportunity Cost

The price paid for not selecting the best available alternative when deciding.

Bushel

A unit of volume that is used primarily in the United States to measure agricultural commodities, equivalent to approximately 35.24 liters.

Comparative Advantage

The ability of an individual, company, or country to produce a good or service at a lower opportunity cost than competitors, enabling beneficial trade.