Question

The cash basis of accounting is acceptable primarily in enterprises that do not have substantial credit transactions or inventories.

a) true
b) false

Answer 1

a) true

Step-by-step explanation:

Cash basis of accounting is the recognition of transactions when the cash is paid or received not when they occur or incur. When an entity does not have substantial credit transactions or inventories it is convenient for them to use the cash basis since these credit transactions do not happen frequently.