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    Question

    Which of the following statements is true for cash basis accounting?

    A Revenue is recognized when earned Correct Answer Incorrect Answer
    B Expenses are recognized when incurred Correct Answer Incorrect Answer
    C Both A and B Correct Answer Incorrect Answer
    D None of the above Correct Answer Incorrect Answer

    Solution

    The correct answer is D. In cash basis accounting, revenue is recognized only when cash is received and expenses are recognized only when cash is paid. Therefore, revenue is not recognized when earned and expenses are not recognized when incurred.

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