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

question 105

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).

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Definitions:

Cash Payback Period

The time it takes for an investment to generate an amount of cash inflows equal to the initial cost of the investment.

Net Cash Flows

The difference between cash inflows and cash outflows within a specified period, reflecting the total amount of cash being transferred into and out of a business.

Estimated Cost

A projection or approximation of the cost associated with a particular project, product, or activity.

Cash Payback Period

The time it takes for an investment to generate enough cash flow to recoup the initial outlay.