Which of the Following Must Use the Accrual Method of Accounting

question 45

Multiple Choice

Which of the following must use the accrual method of accounting?
I. A property management company, operating as a C corporation, with average annual gross receipts of $50 million.
II. An incorporated law firm with average annual gross receipts of $26 million.
III. An unincorporated grocery store with average annual gross receipts of $27,000,000.

• A) All of the above must use the accrual method.
• B) None of the above must use the accrual method.
• C) Only I and II must use the accrual method.
• D) Only I and III must use the accrual method.
• E) Only III must use the accrual method.

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Definitions:

Statement Of Cash Flows

A report that captures the effects of changes in balance sheet accounts and income on the availability of cash and cash equivalents.

Equipment

Tangible property other than land or buildings that is used in operations of a business, such as machinery or office furniture.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption or wear and tear.

Statement Of Cash Flows

An accounting document illustrating the impact of adjustments in balance sheet figures and profits on cash and cash equivalents, separated into operating, investing, and financing sectors.