Which of the following relates to cash basis of accounting?

  • A Accruals and prepayments are considered
  • B Debtors and creditors are recorded
  • C Fixed assets are written off in the year of purchase
  • D Profits are maximized

The correct answer is A. Accruals and prepayments are considered

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. Thus, you record revenue only when a customer pays for a billed product or service, and you record a payable only when it is paid by the company.

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