An Auditor Is Reporting on Cash Basis Financial Statements

question 30

Multiple Choice

An auditor is reporting on cash basis financial statements.These statements are best referred to in his or her report by which one of the following descriptions?

• A) Financial position and results of operations arising from cash transactions.
• B) Assets and liabilities arising from cash transactions and revenue collected and expenses paid.
• C) Balance sheet and income statement resulting from cash transactions.
• D) Cash balance sheet and the source and application of funds.

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Definitions:

Rent Expense

This outlines the cost incurred by a business to use property or equipment as part of its operational activities for a certain period.

Wages Expense

The total cost incurred by a company to compensate its employees, including salaries, wages, and other forms of employee benefits.

Operating Revenues

The income earned by a company from its normal business activities, typically from the sale of goods and services to customers.

Cash Sales

Transactions where goods or services are paid for with cash at the time of the sale, rather than on credit.