The Accrual Basis of Accounting

question 121

Multiple Choice

The accrual basis of accounting

• A) Is generally accepted for external reporting because it gives more useful information
• B) Is not acceptable because it gives incomplete information about cash flows
• C) Recognizes revenues when received
• D) Recognizes expenses when paid
• E) Eliminates the need for adjusting entries

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Definitions:

Subsidiary Entity

A company that is controlled by another company, known as the parent company, typically through ownership of more than half of its voting stock.

Business Combination

Transactions or events that result in the merger of two or more companies, leading to the formation of a single entity.

Non-controlling Interest

A stake in a corporation where the ownership percentage does not grant the holder significant influence over the company’s operations and decisions.

Inventory

Goods or materials that a business holds for the purpose of selling them or turning them into products for sale.