The Accrual Basis of Accounting

question 208

Multiple Choice

The accrual basis of accounting:

• A)Is generally accepted for external reporting since it is more useful for most business decisions.
• B)Is flawed because it gives complete information about cash flows.
• C)Recognizes revenues when received in cash.
• D)Recognizes expenses when paid in cash.
• E)Eliminates the need for adjusting entries at the end of each period.

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Definitions:

GAAP

Generally Accepted Accounting Principles (GAAP) are a set of accounting standards and principles designed to ensure consistency in financial reporting.

Repetitive Basis

A method or process that is regularly repeated in a consistent manner over time, often used to describe routine transactions or operations.

Deferred Charge

An expenditure paid for in one accounting period but reported as an asset because it will provide benefits in future periods.

Sales Tax

A tax imposed by governments on the sale of goods and services, collected by the retailer at the point of sale.