Question

Compared to the accrual basis of accounting, the cash basis of accounting understates income during the accounting period by the net increase of the

          Accounts receivable      Accrued expenses payable

          A.   Yes                       Yes

          B.   Yes                       No  

          C.   No                        Yes

          D.   No                        No

          E.   Yes                       Yes

Answer 1

Accrual basis Accounting : In this method of accounting income and expenses are booked on the basis of their accrual.

Cash Basis Accounting: In this method of accounting income and expenses are book under the receipt basis of accounting.

Account receivable: This means sales are made on the credit basis it means in accrual method income will be more and under cash basis income will be less

Accrued expenses Payable: It means expenses in recorded under accrual basis accounting but expenses in not recorded under cash basis so income will be higher under cash basis

As per above explanation,

Answer = Option C = No      & Yes