Question

The cash basis of accounting A : is the method required by generally accepted accounting principles. B : follows the revenue recognition principle. C : follows the matching principle. D : recognizes expenses when they are paid.

Answer 1

Answer:

The answer is D : recognizes expenses when they are paid.

The cash basis of Accounting is not allowed during the preparation of income statement, balance sheet and the statement of share holder equity yet it is allowed during the preparation of cash flow statement.

Under this, revenue is recognised only when it is received in cash or cash equivalents and not when it is realized.