Which of the Following Statements Is TRUE of Accrual Basis

question 170

Multiple Choice

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

• A) Accrual basis accounting is required 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) Accrual basis accounting always results in greater net income than cash basis accounting.

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Definitions:

Paid-in Capital

The amount of capital provided by shareholders in exchange for stock, representing the funds raised by issuing shares above the par value.

Treasury Stock

Stocks that have been distributed and subsequently bought back by the issuing corporation, diminishing the number of shares available for trading on the public market.

Acquisition Cost

The total cost associated with acquiring an asset, including the purchase price and all related expenses necessary to bring the asset to a condition ready for its intended use.

Authorized Stock

Authorized stock is the maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation.