- 1 Marks
Question
Which of the following statements correctly describes cash basis of accounting?
- A. Revenue is recognised in the period when it is earned, regardless of when the cash is received
- B. Expenses are recognised in the period when they are incurred, regardless of when they are paid
- C. Revenue is recognised in the period when the cash is received, regardless of when it is earned
- D. Expenses are recognised in the period when they are earned, regardless of when they are incurred
- E. Both revenue and expenses are recognised in the period when they are occurred, regardless of cash transactions
Answer
C. Revenue is recognised in the period when the cash is received, regardless of when it is earned
Explanation: The answer C is correct as cash basis accounting recognizes revenues and expenses only when cash is exchanged, rather than when the transaction occurs.
- Tags: Accounting principles, Cash Basis, Revenue Recognition
- Level: Level 1
- Topic: Bases of Accounting: Accrual vs. Cash
- Series: NOV 2023
- Uploader: Theophilus