Which Statement Is Correct

question 6

Multiple Choice

Which statement is correct?

• A) As long as a company consistently uses the cash basis of accounting, IFRS allow its use.
• B) The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles.
• C) The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received.
• D) As long as management is ethical, there are no problems with using the cash basis of accounting.

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Definitions:

Purchase Agreement

A legal document outlining the terms and conditions of a purchase between a buyer and a seller.

Compounded Monthly

The process of adding interest to the principal sum of a loan or deposit, or compound interest, on a monthly basis.

Withdrawals

The act of taking money out of an account.

Compounded Semi-annually

The process of calculating interest on an investment or loan every six months on both the initial principal and previously accumulated interest.