Which of the Following Regarding Accrual Versus Cash-Basis Accounting Is

question 28

Multiple Choice

Which of the following regarding accrual versus cash-basis accounting is true?

• A) The FASB believes that the cash basis is appropriate for some smaller companies, especially those in the service industry.
• B) The cash basis is less useful in predicting the timing and amounts of future cash flows of an enterprise.
• C) Application of the cash basis results in an income statement reporting revenues and expenses.
• D) The cash basis requires a complete set of double-entry records.

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Definitions:

Ameritech

A telecommunications company that was one of the Regional Bell Operating Companies following the breakup of AT&T.

Marginal Cost

The incremental cost of fabricating one more unit of a product or service.

Profit-maximizing Quantity

The point of production where a company reaches its maximum profit, occurring when marginal revenue is equal to marginal cost.

Profit-maximizing Price

The price at which a firm can achieve the highest possible profit.