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Financial Accounting

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Accrual Versus Cash Basis Accounting Concepts

FINACT-L9BKBS

Which of the following statements regarding accrual and cash basis accounting are TRUE?

Select ALL true statements.

A

Accrual basis accounting is required under FASB rules for ALL companies.

B

Accrual accounting generally leads to a higher reported net income than cash basis accounting.

C

If a company with a beginning accounts receivable balance of zero sells inventory on account and fails to collect all that it sells in a given year, accrual basis net income will be higher than cash basis net income.

D

When comparing accrual basis accounting and cash basis accounting, only revenue is different meaning expenses are always the same under both methods.

E

The statement of cash flows reports net income on a cash basis as the total of the Operating Activities section.

F

The IRS requires that corporate income tax returns be reported on the modified cash basis of accounting.