The _____ would result in an increase in income under the cash basis but not an increase in income under the accrual basis.
A)credit sale of inventory at a sales price in excess of the inventory's cost
B)cash collection from a credit customer
C)cash sale of inventory at a sales price in excess of the inventory's cost
D)return of defective inventory purchased on account to a supplier where a full credit was given

Question

Quizplus · Accepted Answer

Under the cash basis of accounting, income is recognized when cash is received, regardless of when the sale was made. Therefore, collecting cash from a credit customer (where the sale was previously made on credit) would increase income under the cash basis at the time of collection. However, under the accrual basis, income is recognized when earned, typically at the time of sale, not when cash is received. Thus, the collection of cash from a credit customer would not affect income under the accrual basis since the income was already recognized at the time of sale.

The _____ Would Result in an Increase in Income Under