GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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On the basis of actual receipt of cash and actual payment of cash
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When income is earned by a business of expenditure is incurred by it
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When order for goods to be purchased is placed and order for goods to be sold is received
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All of the above
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Detailed explanation-1: -Cash Basis Accounting is an accounting method in which all the company’s revenues are recognized when there is actual receipt of the cash, and all the expenses are recognized when they are paid. Individuals and small companies generally follow the method.
Detailed explanation-2: -Cash basis accounting is the method of accounting that records the payment and receipt of cash as it happens. It is the simplest form of accounting that is often used in small businesses and proprietorships because of its ease of use. It is especially easy to implement in a business that has no inventory.
Detailed explanation-3: -In other words, the cash basis of accounting recognises the expenses incurred and revenues earned immediately, when money changes hands between two parties involved in the transaction. Whereas, the accrual basis of accounting recognises expenses when they are billed (not paid) and revenues when they are earned.