How Many of the Following Statements Regarding the Accrual and Cash

question 124

Multiple Choice

How many of the following statements regarding the accrual and cash basis of accounting are true?
Using the accrual basis of accounting, if payment is received before delivery of a good or service, a liability is recorded at the time the payment is received.
Using the accrual basis of accounting, if payment is received after delivery of a good or service, an asset is recorded at the time the good or service was delivered.
Generally accepted accounting principles require the accrual basis of accounting to be used for external financial reporting purposes.

• A) None
• B) One
• C) Two
• D) Three

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Definitions:

Call

A financial term referring to an option contract that gives the holder the right, but not the obligation, to buy a specific amount of a security at a specific price within a specific time period.

Exercise Price

The price at which the holder of an options contract can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset or security.

Stock Price

The cost of purchasing one share of a company, which fluctuates based on market conditions and perceived value.

Upper Bound

The highest value that a particular parameter can assume, often used in the context of optimization and approximation problems.