Which of the following situations would result in an increase in income under the accrual method of accounting,but would NOT result in an increase in income under the cash-basis method of 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

The performance of services on account under the accrual method of accounting would result in an increase in income, even if cash has not been received yet. However, under the cash-basis method, income is only recognized when cash is received, so the receipt of cash for services performed earlier on account (choice D) would result in an increase in income under both methods of accounting. The purchase of supplies for cash (choice A) and the use of supplies purchased earlier (choice C) are not related to income recognition under either method of accounting.

Which of the Following Situations Would Result in an Increase