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:

Supplies Expense

The cost associated with consumable items used during the business operations and not directly tied to the production of goods or services.

Fees Earned

Income earned from providing services or performing work, recognized in the accounting period when the services are rendered.

Cash

Money in the form of bills or coins; the most liquid asset available.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for, represented as an asset on the balance sheet.