Which of the Following Statements About Cash Basis Accounting and Accrual

question 58

Multiple Choice

Which of the following statements about cash basis accounting and accrual basis accounting is correct?

• A)If payment is received at the same time a service is provided,it does not matter whether cash basis accounting or accrual basis accounting is used;both would record the transaction with the same journal entry.
• B)The cash basis of accounting works best when a lengthy delay exists between the timing of cash flows and the underlying business activities to which they relate.
• C)If a company receives a bill for rent for the period and decides to delay payment,the rent will not be recorded as an expense if accrual basis accounting is used.
• D)If the cash basis of accounting is used,the Deferred Revenue account is increased when a company receives a deposit in advance of services to be performed by the company.

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Definitions:

Short-Term Basis

A term indicating a period or scenario focused on the immediate or near future, often involving decisions or plans that are temporary or for a duration of up to one year.

Negative Residual Value

Negative residual value implies that the value of an asset at the end of its useful life is expected to be less than zero, indicating costs associated with disposal or removal.

Environmentally Sound

Practices or operations that have a minimal negative impact on the environment, promoting sustainability.

Lease Rate

The cost of leasing or renting a particular asset, property, or equipment, usually expressed as a payment amount per time period.