Why Is the Cash Basis of Accounting Not Appropriate for Use

question 75

Multiple Choice

Why is the cash basis of accounting not appropriate for use by publicly traded corporations?

• A)the OSC (Ontario Securities Commission)does not allow its use
• B)no assets or liabilities other than cash would ever appear on the statement of financial position,giving a distorted picture of financial position
• C)the profit reported could not be distorted if a large customer paid for goods in advance or we postponed paying for goods or services until the next accounting period
• D)the cash basis is not permitted for tax purposes

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Definitions:

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