A Retailing Business May Use the Cash-Basis Method of Accounting

question 102

True/False

A retailing business may use the cash-basis method of accounting for purposes of determining sales and cost of goods sold if average gross receipts do not exceed $1 million.

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Definitions:

Equity

The value of an asset after deducting the amount of liabilities or the ownership interest in a company.

Revenues

Sum of income from the primary business activities of a company, which includes sales of its products or services.

Unearned Revenues

Money received by a company for goods or services that have yet to be delivered or performed, considered a liability until earned.

Liabilities

Liabilities represent debts or financial obligations that a company owes to others, which must be settled over time through the transfer of economic benefits.