Correct Answer:
B. Cash is received or paid
Cash basis ignores receivables and payables until cash moves.
November 13, 2026 · Accounting and Finance MCQs, Public Sector Accounting & Auditing MCQs
Under the cash basis of accounting, transactions are recognized when:
Related MCQs
A bonus issue of shares:
A.
Raises new cash for the company
B.
Capitalizes reserves and brings in no cash
C.
Reduces the number of shares
D.
Is a payment of cash dividend
Correct answer is:
B. Capitalizes reserves and brings in no cash
Do you agree with this answer?
The matching principle requires that:
A.
Expenses are recorded in the same period as the revenues they helped to earn
B.
Debits equal credits
C.
Assets equal liabilities
D.
Revenues are recorded when cash is received
Correct answer is:
A. Expenses are recorded in the same period as the revenues they helped to earn
Do you agree with this answer?
A prepaid expense is shown in the statement of financial position as:
A.
A current liability
B.
A current asset
C.
Equity
D.
Revenue
Correct answer is:
B. A current asset
Do you agree with this answer?
The basic accounting equation is:
A.
Assets = Liabilities + Equity
B.
Assets = Liabilities - Equity
C.
Assets + Liabilities = Equity
D.
Equity = Assets + Liabilities
Correct answer is:
A. Assets = Liabilities + Equity
Do you agree with this answer?
A Draft Audit Para (DAP) or audit observation is:
A.
A final order of the court
B.
A budget estimate
C.
A finding sent by auditors to the department for reply before it is finalized
D.
A tax notice
Correct answer is:
C. A finding sent by auditors to the department for reply before it is finalized
Do you agree with this answer?
Current assets are Rs. 250,000, inventory is Rs. 100,000 and current liabilities are Rs. 100,000. The quick ratio is:
A.
1.5
B.
2.5
C.
1.0
D.
0.4
Correct answer is:
A. 1.5
Do you agree with this answer?
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