Question

1. The objective of the accrual basis accounting is to

Report expected future accomplishments and link them to expected efforts.

Match cash inflows of the period with their associated cash outflows.

Include revenue in the income statement of the period when control of the goods and services produced passes to the customer (regardless of when cash is received) and match costs incurred (expenses) against the revenue (regardless of when paid).

Provide information for investors to assess current period cash flows.

2. Which of the following is (are) important to users of financial statements in assessing the future cash flows of a firm?

their amounts

their timing

their uncertainty

all of the above

Answer 1

1) option 'c' is correct

The objective of the accrual basis accounting is to include revenue in the income statement of the period when control of the goods and services produced passes to the customer (regardless of when cash is received) and match costs incurred (expenses) against the revenue (regardless of when paid).

and account the expense when incurred and not when cash actually paid. for example rent for the month of march to be accounted in the month of march itself even when rent is paid in the month of April.

2) Option 'D' is correct

'All of the above'

The amounts, the timing and the uncertainties are the factors important to the Users of financial statements in assessing the future cash flows of a firm.