Kimmel, Accounting, 6e Helo I Svstem Announcements T RESOURCES rinciples of s Mi
ID: 2543126 • Letter: K
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Kimmel, Accounting, 6e Helo I Svstem Announcements T RESOURCES rinciples of s Midterm rcse 183 Multiple Choice Question 73 Under the cash basis of accounting: Choice O revenue is recognized when services are performed. O expenses are matched with the revenue that is produced O cash must be received before revenue is recognized. O a promise to pay is sufficient to recognize revenue. Click if you would like to Show Work for this question: Open Show Work 159 165 140 135 Choice 141 Choice Choice 1145 151 Choce eExplanation / Answer
Answer is option C
Cash basis is a major accounting method that recognizes revenues and expenses at the time physical cash is actually received or actually paid out.This is in contrast to the other major accounting method which is accrual method.Under the accrual method, income is recognized in a company's books at the time the revenue is earned, but not necessarily received, and records expenses when liabilities are incurred, but not necessarily paid.
The cash basis is a method of recording accounting transactions for revenue and expenses only when the corresponding cash is received or payments are made. Thus, you record revenue only when a customer pays for a billed product or service, and you record a payable only when it is paid by the company.
Cash basis is majorly used by many sole proprietors and businesses with no inventory.
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