Which of the following relates to cash basis of accounting?
A. Accruals and prepayments are considered B. Debtors and creditors are recorded C. Fixed assets are written off in the year of purchase D. Profits are maximized
Correct Answer: A
Explanation
The cash basis is a method of recording accounting transactions for revenue and expenses only when the corresponding cash is received or payments are made. Thus, you record revenue only when a customer pays for a billed product or service, and you record a payable only when it is paid by the company.
