A Company received a $10,000 deposit from a customer for goods to be delivered the following month. Under the accrual and cash basis of accounting respectively thedeposit would be recorded as:
A)Accrual Basis: income | Cash Basis: income
B)Accrual Basis: income | Cash Basis: a liability
C)Accrual Basis: a liability | Cash Basis: income
D)Accrual Basis: a liability | Cash Basis: a liability
E)Accrual Basis: an asset | Cash Basis: an asset

Question

Quizplus · Accepted Answer

Under the accrual basis, the deposit is recorded as a liability because the company has an obligation to deliver goods. Under the cash basis, it is recorded as income because the cash has been received.

A Company Received a $10,000 Deposit from a Customer for Goods