The Accrual Basis of Accounting Is Often Contrasted with the Cash

question 80

Multiple Choice

The accrual basis of accounting is often contrasted with the cash basis of accounting.Which of the following is/are true of the cash basis of accounting?

• A)The cash basis is not subject to manipulation.
• B)Most larger companies use the cash basis of accounting.
• C)The cash basis of accounting provides a strong basis to determine the total assets of the company.
• D)The cash basis provides an inferior picture of operating performance.
• E)All of the above are true.

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Definitions:

Net Income

A company's overall earnings once expenses and taxes are removed from its revenue.

Ending Inventory

The complete value of commodities being offered for sale upon the closing of a financial period.

Adjustment Credit Column

The Adjustment Credit Column is a section in accounting ledgers or spreadsheets where adjustments, such as credit transactions, are recorded to rectify account balances.

Worksheet

A document or tool used by accountants to plan adjustments and prepare financial statements before they are posted to ledgers.