25-26 Cash VS Accrual

Multiple Choice

According to the matching principal, when should a business record transactions in its books and records?

• When cash is received

• When the event occurs, not when cash is exchanged

• At the end of the fiscal year

• Only after bank reconciliation

Multiple Select

Select all statements that are true about cash accounting. (Choose 3)

• It records transactions when cash is received or used.

• It is not concerned if the activities associated with those transactions have taken place.

• It is a Generally Accepted Accounting Principal (GAAP) method.

• It is generally used by individuals and some very small businesses.

Multiple Choice

Cash accounting is generally used by:

• Public corporations

• Large companies

• Individuals and very small businesses

• Banks only

Multiple Choice

Which accounting method records transactions only when cash is received or paid?

• Accrual Accounting

• Cash Accounting

• Matching Accounting

• Deferred Accounting

Multiple Choice

Under cash accounting, revenue is recorded when:

• It is earned

• Cash is received

• A contract is signed

• An invoice is issued

Multiple Choice

Which of the following statements best describes the main difference between cash accounting and accrual accounting?

• Cash accounting records transactions when cash is received or used, while accrual accounting records transactions when revenues are earned and expenses are incurred.

• Cash accounting is a Generally Accepted Accounting Principal (GAAP) method, while accrual accounting is not.

• Cash accounting is used by almost all businesses, while accrual accounting is used by individuals and small businesses.

• Cash accounting records transactions only when activities have taken place, while accrual accounting records transactions only when cash is received.

Multiple Choice

Which accounting method is considered GAAP compliant?

• Cash Accounting

• Accrual Accounting

• Hybrid Accounting

• None of these.

Multiple Choice

Under accrual accounting, expenses are recorded when:

• Cash is paid

• A bill is created

• The resource is used (incurred)

• The month ends

Multiple Choice

Accrual accounting is primarily used by:

• Individuals

• Small hobby businesses

• Almost all businesses

• Only government organizations

Multiple Choice

The phrase “IE = Income Earned” means:

• Record income when cash arrives

• Record income when the activity has been performed

• Record income at year-end only

• Ignore income until audited

Multiple Choice

“EI = Expenses Incurred” means:

• Record expenses when paid

• Record expenses when supplies are purchased

• Record expenses when the resource has been used

• Never record expenses

Multiple Choice

Which accounting cycle step is a good example of EI?

• Preparing a Trial Balance and totaling debits and credits to avoid transpose errors

• Posting to the General Ledger in order to track account balances

• Analyzing the Transaction using the T accounts

• Adjusting Supplies and Prepaid Insurance on the trial balance worksheet

Multiple Choice

Which of the following events shows “earned” revenue?

• Receiving cash before doing work

• Performing the service or delivering goods

• Signing a contract

• Depositing a check

Multiple Choice

If a company earns revenue in March but receives cash in May, under accrual accounting revenue is recorded in:

• March

• May

• January

• It is not recorded

Multiple Choice

Which method ignores whether work has been performed?

• Accrual

• Cash

• Matching-based

• Reconciliation

Multiple Choice

On March 5th, 2024, Valley View Landscaping completed yard work for a customer.
The customer didn’t have cash available that day, so they paid $350 in cash on April 1st, 2024.

Under Cash Basis Accounting, how much revenue should Valley View Landscaping record on March 5th?

• $0

• $176

• $350

• Depends on the type of customer

Multiple Choice

On March 5th, 2024, Valley View Landscaping completed yard work for a customer.
The customer didn’t have cash available that day, so they paid $350 in cash on April 1st, 2024.

Under Accrual Basis Accounting, how much revenue should Valley View Landscaping record on March 5th?

• $0

• $176

• $350

• Depends on the type of customer

Match

Match the following (Note Inc=Income and Exp= Expense)

• Earned Revenue

• Cash Accounting

• Accrual Accounting

• Incurred Expense

• GAAP

Income recorded when service performed

Method recording when cash moves

Method records when Inc or Exp incurred

Outlay recorded when resource is used

Guidelines for matching Inc with Exp

• Income recorded when service performed

• Method recording when cash moves

• Method records when Inc or Exp incurred

• Outlay recorded when resource is used

• Guidelines for matching Inc with Exp