Which of the following would result in an increase in income under the accrual method of accounting, but would not result in an increase in income under the cash basis accounting?
A)Purchase of supplies for cash
B)Performance of services on account
C)Use of supplies purchased earlier
D)Receipt of cash for services that were performed earlier on account

Question

Quizplus · Accepted Answer

Under accrual accounting, income is recognized when it is earned, regardless of when payment is received. Therefore, performing services on account would increase income under accrual accounting. However, under cash basis accounting, income is only recognized when payment is received, so the receipt of cash for services performed earlier on account would increase income under cash basis accounting as well. A, C, and D all involve cash transactions, which would increase income under both accrual and cash basis accounting.

Which of the Following Would Result in an Increase in Income