Yellow Co. makes a sale to a customer in January but does not receive payment until March. Yellow Co. records the sale in January. Which method of accounting is Yellow Co. using?
A) accrual basis of accounting
B) cash basis of accounting
C) hybrid basis of accounting
D) consolidated basis of accounting

Question

Quizplus · Accepted Answer

Yellow Co. is using the accrual basis of accounting as it records the sale in January when it occurred, even though the payment was not received until March. This method of accounting recognizes revenue and expenses when they are earned or incurred, regardless of when the cash is received or paid.

Yellow Co Makes a Sale to a Customer in January but but Does