Which of the following entries would be recorded if a company is using the cash-basis method of accounting?
A)
$$\begin{array} { | l | l | l | l | }
\hline \text { Cash } & & 1,000 & \
\hline & \text { Service revenue } & & 1,000 \
\hline
\end{array}$$
B)
$$\begin{array} { | l | l | l | l | }
\hline \text { Cash } & & 1,000 & \
\hline & \text { Accounts receivable } & & 1,000 \
\hline
\end{array}$$
C)
$$\begin{array} { | l | l | l | l | }
\hline \text { Salary expense } & & 1,000 & \
\hline & \text { Cash } & & 1,000 \
\hline
\end{array}$$
D) Both A and C are correct.

Question

Which of the following entries would be recorded if a company is using the cash-basis method of accounting?
A)
$$\begin{array} { | l | l | l | l | } 
\hline \text { Cash } & & 1,000 & \
\hline & \text { Service revenue } & & 1,000 \
\hline
\end{array}$$
B)
$$\begin{array} { | l | l | l | l | } 
\hline \text { Cash } & & 1,000 & \
\hline & \text { Accounts receivable } & & 1,000 \
\hline
\end{array}$$
C)
$$\begin{array} { | l | l | l | l | } 
\hline \text { Salary expense } & & 1,000 & \
\hline & \text { Cash } & & 1,000 \
\hline
\end{array}$$
D) Both A and C are correct.

Quizplus · Accepted Answer

In cash-basis accounting, revenues are recorded when cash is received, and expenses are recorded when cash is paid. Both A (recording service revenue upon receipt of cash) and C (recording salary expense when cash is paid out) are consistent with cash-basis accounting principles. B is incorrect because it involves accounts receivable, which is used in accrual accounting, not cash-basis accounting.

Which of the Following Entries Would Be Recorded If a Company