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Q1 - Which financial statement is prepared according to cash basis of accounting: a. Cash Flow...

Q1 - Which financial statement is prepared according to cash basis of accounting:

a. Cash Flow Statement

b. Income Statement

c. Balance Sheet

d. Retained earnings Statement

Q2 - ............... is a present obligation that grew out of a past event and will require a future sacrifice to extinguish the obligation.

a. Unearned Revenue

b. Equity

c. Expense

d. Liability

Q3 - Days ‘sales uncollected ratio is

a. Average receivable/ credit sales

b. Accounts receivable/ net credit sales* 365 days

c. Credit sales/ average receivable

d. Accounts receivable/ total average assets.

Business   Accounting   
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Answer #1

Required 1: The correct option is a i.e Cash flow statement.

The cash basis is a method of recording accounting transactions for revenue and expenses only when the corresponding cash is received or payments are made.

Required 2: The correct option is D i.e Liability.

Liability is a present obligation that grew out of a past event and will require a future sacrifice to extinguish the obligation.

Required 3: The correct option is B i.e Accounts receivable/ net credit sales* 365 days.

Days sales uncollected ratio helps in measuring the days within which the company will actually receive the cash for its sales.

Days sales uncollected = (Accounts receivable / Net credit sales) * 365.

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