_____ would result in an increase in net income under the accrual basis, but not an increase in net income under the cash basis.
A)The sale of inventory on account at a sales price in excess of cost
B)Cash collection from a credit customer
C)The cash sale of inventory at a sales price in excess of cost
D)The expiration of prepaid rent

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, revenues are recognized when earned, not necessarily when cash is received. Therefore, the sale of inventory on account (i.e., on credit) at a price exceeding its cost increases net income immediately upon the sale under the accrual basis, even though cash has not yet been received. This does not affect net income under the cash basis until the cash is actually collected. Choices B, C, and D involve cash transactions or the passage of time, which would impact net income similarly under both the cash and accrual basis.

_____ Would Result in an Increase in Net Income Under