Under Accrual-Basis Accounting

question 115

Multiple Choice

Under accrual-basis accounting

• A) cash must be received before revenue is recognized.
• B) net income is calculated by matching cash outflows against cash inflows.
• C) events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.
• D) the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under IFRS.

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Definitions:

Cash Discount

A reduction in the invoice price given by the seller to the buyer for quick payment within a specified period.

Merchandise

Products that a company buys to resell to its customers.

Cash Paid

The actual outflow of cash during a period for expenses, investments, and other financial activities.

Perpetual Inventory System

An inventory tracking system where updates are made continuously as transactions occur, providing real-time inventory levels.