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The cash basis of accounting is objective because no one can be
certain of the amount of revenue until the cash is received.
As long as management is ethical, there are no problems with using
the cash basis of accounting.
As long as a company consistently uses the cash basis of accounting,
generally accepted accounting principles allow its use.
The use of the cash basis of accounting violates both the revenue
recognition and expense recognition principles.
Multiple Choice Question 61
Under accrual-basis accounting
net income is calculated by matching cash outflows against cash
inflows.
the ledger accounts must be adjusted to reflect a cash basis of
accounting before financial statements are prepared under generally
accepted accounting principles.
cash must be received before revenue is recognized.
events that change a company’s financial statements are recognized in
the period they occur rather than in the period in which cash is paid or
received.
Multiple Choice Question 165
Expenses paid and recorded as assets before they are used are called
accrued expenses.
interim expenses.
prepaid expenses.