Question
Which of the following is correct about accrual-basis accounting and cash-basis accounting? a. Managers can manipulate accruals downward to inflate the firm's net income. b.
Which of the following is correct about accrual-basis accounting and cash-basis accounting?
a. Managers can manipulate accruals downward to inflate the firm's net income.
b. If the net income is calculated at the end of a company's economic life, i.e. after the business is wrapped up and liquidated, then the net income calculated using cash-basis accounting is greater than that using accrual-basis accounting.
c. Under accrual-basis accounting, expense is recognized in the same period as the revenue it relates to or in the period to which it is attributable.
d. GAAP gives companies the freedom to use either accrual-basis or cash-basis accounting.
e. Accruals-related accounts include accounts receivable, accounts payable, prepaid expenses, marketable securities, accrued wages, etc.
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