i. Explanation of Cash, Accrual, and Break-up Bases of Accounting:

1. Cash Basis of Accounting:
   This method recognizes revenue and expenses only when cash is received or paid, respectively. It does not account for receivables or payables.
2. Accrual Basis of Accounting:
   Under this basis, transactions are recorded when they are incurred, regardless of when cash is received or paid. It matches income and expenses to the period in which they occur, which provides a more accurate financial picture.
3. Break-up Basis of Accounting:
   This basis assumes that the business will not continue as a going concern. Assets are valued at the amount they would realize if the company were liquidated.

ii. Limitations of Cash Basis of Accounting:

1. Ignores Receivables and Payables:
   The cash basis fails to recognize accounts receivable or payable, which can lead to an incomplete picture of a company’s financial health.
2. Inaccurate Matching of Income and Expenses:
   Expenses may not be matched with the revenues they generate, which can distort the profit or loss for the period.
3. No Recognition of Non-Cash Transactions:
   Non-cash transactions, such as depreciation and amortization, are not recognized under the cash basis, making it less useful for businesses with significant non-cash expenses.
4. Unsuitable for Large Businesses:
   Large or publicly traded companies are often required to use the accrual basis due to regulations and to provide a more accurate financial representation.

b. Explanation of the Operation of a Petty Cash Book:
A petty cash book is used to record small, routine payments. It operates under the Imprest System, where a fixed amount is allocated to the petty cashier. As expenses are incurred, receipts are collected, and the amount spent is replenished to the original imprest amount. This helps to control small expenditures and maintain accurate records of minor expenses.