When Converting from Cash-Basis to Accrual-Basis Accounting, Which of the Following

question 45

Multiple Choice

When converting from cash-basis to accrual-basis accounting, which of the following adjustments should be made to cash paid for operating expenses to determine accrual-basis operating expenses?

• A) Add beginning accrued liabilities.
• B) Subtract beginning prepaid expense.
• C) Subtract ending prepaid expense.
• D) Subtract interest expense.

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Definitions:

Marginal Tax Bracket

The tax rate that applies to the last dollar of the taxpayer's income, illustrating the percentage of tax applied to your income for each tax bracket in which you qualify.

Net Operating Losses

Losses incurred when a company's operating expenses exceed its revenues, which can often be carried forward or backward to reduce future or past taxable income.

Interest Tax Savings

The reduction in income tax that results from the deductibility of interest payments on certain types of loans, such as mortgages.

Discount Rate

The interest rate used to discount future cash flows of a project or investment to determine its present value.