Question 13
GCE_MODEL_QUESTIONS_VOL1
•
2024
•
FINANCIAL_ACCOUNTING
•
objective
Briefly explain the difference between the accruals concept and the cash basis of accounting, and give one example of a transaction that would be recorded under the accruals concept but not under the cash basis.
Answer Options
A.
Accruals and cash basis are the same; both record transactions when cash moves. Example: Recording a purchase on credit is treated identically under both methods.
B.
Accruals record cash flows only when cash is received or paid; cash basis records revenues when earned. Example: Recording a sales invoice when the customer pays (cash) but not when the invoice is issued (accrual).
C.
Accruals recognise expenses only when cash is paid; cash basis recognises them when incurred. Example: Paying a utility bill is recorded under accruals but ignored under cash basis.
Correct Answer
D.
Accruals recognise revenues/expenses when earned/incurred; cash basis records only when cash moves. Example: Recording an electricity bill when received (accrual) but not when paid (cash basis).
Correct Answer
D
Correct Option:
Accruals recognise revenues/expenses when earned/incurred; cash basis records only when cash moves. Example: Recording an electricity bill when received (accrual) but not when paid (cash basis).
About This Question
This is
Gce Model Questions Vol1
2024
Financial Accounting
Question 13.
It is one of the
objective
questions from the
2024
Gce Model Questions Vol1
Financial Accounting
examination.
Difficulty level:
Easy
.