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True or False Accrual basis income and cash basis income are often different amounts for each...

  1. True or False Accrual basis income and cash basis income are often different amounts for each period.

Solutions

Expert Solution

True or False Accrual basis income and cash basis income are often different amounts for each period.

Answer: True

Explanation:

As per accrual basis of accounting income is accounted either on due basis or on receipt basis which ever happens first. In cash basis of accounting income is accounted only when it is received.

For easier understanding, let take a sale transaction as an example. Suppose I made a sale today for $200, payment for the same is due by the end of this month. But customer made the payment in the next month.

In this case, income form sale as per both methods, income will be different.

Income as per accrual basis will be $200 and Income as per cash basis will be Zero.


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