Question

At the time the transaction​ occurred, which of the following would result in an increase in net income under the accrual basis of​ accounting, but would not result in an increase in net income under cash basis​ accounting?
a. performance of services on account
b. receipt of cash for services that were performed earlier on account
c. use of supplies purchased earlier
d. purchase of supplies for cash

Answer 1

Answer: Performance of services on account

Explanation: Under the accrual basis of accounting the revenue from an activity is recorded when it is earned, that is, when the activity is completed. On the other hand, in cash basis of accounting the entry is recorded when cash is received.

So when the services are performed on account then the debtor will arise and the revenue is recorded if he organisation is following accrual basis.

     On the other hand nothing will be recorded under cash basis since the cash is not received yet for the services performed.