Which of the Following Statements Are Correct? for Accrual-Basis Accounting

question 172

Multiple Choice

Which of the following statements are correct? For accrual-basis accounting:
(1) record revenues when earned.
(2) record expenses when cash is paid.
For cash-basis accounting:
(3) record revenue when cash is received.
(4) record expenses when benefit is received.

• A)(1)and (4).
• B)(2)and (3).
• C)(1)and (3).
• D)(2)and (4).

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where supply equals demand.

Excess Demand

A scenario in which the demand for a product or service surpasses the supply available at the existing price.

Surplus

An excess of production or supply over demand.

Excess Supply

A situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price, leading to downward pressure on the price.