At the time the transaction occurred,which of the following would result in an increase in net income under the accrual basis of accounting,but would not result in an increase in net income under 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 basis accounting, revenue is recognized when it is earned (i.e. when services are performed) regardless of when the payment is received. Therefore, performing services on account would increase net income under accrual basis accounting because revenue has been recognized even though payment has not been received. However, cash basis accounting only recognizes revenue when payment is received, so performing services on account would not result in an increase in net income under cash basis accounting. Choices A, C, and D are all related to cash transactions which affect net income under both accrual basis and cash basis accounting.

At the Time the Transaction Occurred,which of the Following Would