Cash to Accrual Basis of Accounting

Under the accrual basis of accounting, cash receipts and disbursements may

• Precede, coincide with, or follow the period in which revenue and expenses are recognized.

• Precede or coincide with but never follow the period in which revenue and expenses are recognized.

• Coincide with or follow but never precede the period in which revenue and expenses are recognized.

• Only coincide with the period in which revenue and expenses are recognized.

Which of the following statements regarding accrual basis versus cash basis of accounting is true?

• The cash basis is appropriate for smaller entities in the service industry.

• The cash basis is less useful in predicting the timing and amount of future cash flows of an entity.

• Application of the cash basis results in an income statement reporting revenue and expenses.

• The cash basis requires a complete set of double-entry records.

Under the cash basis of accounting

• Revenue is recorded when earned.

• Accounts receivable would appear in the statement of financial position.

• Depreciation of assets having an economic life of more than one year is not recognized.

• The matching principle is ignored.

Total net income over the life of an entity is

• Higher under the cash basis than under the accrual basis

• Lower under the cash basis than under the accrual basis

• The same under the cash basis as under the accrual basis

• Not susceptible to measurement

Under International Financial Reporting Standards

• The cash basis of accounting is accepted.

• Events are recorded in the period the events occur.

• Net income is lower under the cash basis than accrual basis.

• All of the choices are correct.

If the ending balance exceeds the beginning balance of accounts receivable

• Cash collections during the year exceed sales.

• Net income is less than cash basis income.

• No cash was collected during the period.

• Cash collections during the year are less than sales.

Under the cash basis of accounting, revenue is recorded

• When earned and realized

• When earned and realizable

• When earned

• When realized

When converting from cash basis to accrual basis, which of the following adjustments should be made to cash receipts from customers to determine accrual basis sales?

• Subtract ending accounts receivable

• Subtract beginning advances

• Add ending accounts receivable

• Add cash sales

When converting from cash basis to accrual basis, which of the following adjustments should be made to cash paid for expenses to determine accrual basis expenses?

• Add beginning accrued expense

• Subtract beginning prepaid expense

• Subtract ending prepaid expense

•  Subtract ending accrued expense

Accrual accounting adheres to which of the following

• Matching principle

• Historical cost principle

• Matching principle and historical cost principle

• Neither matching principle nor historical cost principle