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:

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money, either on demand or at a specified future date.

Maturity Date

The specified date on which the principal amount of a financial instrument, such as a bond, loan or fixed deposit, is due to be repaid.

Negotiability

The quality of being transferable by endorsement or delivery so as to enable the holder to pass title to a third party.

Cashier's Check

A bank-issued check that is drawn from the bank's own funds and signed by a cashier, commonly used for significant transactions requiring guaranteed funds.