When converting an income statement from a cash basis to an accrual basis, expenses:
A) Exceed cash payments to suppliers.
B) Equal cash payments to suppliers.
C) Are less than cash payments to suppliers.
D) May exceed or be less than cash payments to suppliers.

Question

Quizplus · Accepted Answer

When converting from cash basis to accrual basis, certain expenses may have been paid in cash but have not been recorded in the period that they belong to, resulting in expenses that exceed cash payments to suppliers. On the other hand, some expenses may have been recorded in a period but not yet paid, resulting in expenses that are less than cash payments to suppliers. Therefore, it is possible that expenses may exceed or be less than cash payments to suppliers.

When Converting an Income Statement from a Cash Basis to an Accrual