Which of the Following Statements Relating to the Cash Basis

question 37

Multiple Choice

Which of the following statements relating to the cash basis of accounting is incorrect?

• A) Income is recorded in the period in which the cash is received.
• B) It is used by small business entities and professionals who conduct most of their business activities in cash.
• C) It is considered to be a suitable method of accounting for governments.
• D) The cost of goods and services consumed in the current period, but not paid for, are recognised as expenses in a later period when cash is paid.

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Definitions:

Monetary Policy

The process by which the central bank of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

United States Government Budget

The budget prepared by the federal government, outlining its projected revenues and expenditures for the forthcoming fiscal year.

Fiscal Year

A one-year period used by governments and businesses for accounting and budget purposes, which may not align with the calendar year.

Welfare Spending

Government expenditure on social protection programs intended to support the well-being of citizens, such as health care, unemployment benefits, and social security.