Which of the Following Statements Is True of Accrual Basis

question 57

Multiple Choice

Which of the following statements is true of accrual basis accounting?

• A)Accrual basis accounting is allowed by Generally Accepted Accounting Principles (GAAP).
• B)Accrual basis accounting records expenses only when cash has been paid for them.
• C)Accrual basis accounting records revenue only when cash is received.
• D)It always results in greater net income than cash basis accounting.

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Definitions:

Fair Value

Fair value is the estimated market price of an asset or liability, reflecting the amount at which an informed transaction could take place between willing parties.

Pushdown Accounting

An accounting method where the purchase price of an acquired entity is pushed down onto the acquired entity's financial statements.

FASB Accounting Standards

Stands for Financial Accounting Standards Board Accounting Standards, which set the rules for financial accounting and reporting in the U.S.

Business Combinations

The process by which one company acquires control over another, resulting in the consolidation of assets and liabilities under one entity.