Question

Let's say a customer pays for a TV with a credit card. What would this look like under cash-based vs. accrual accounting?

a) Cash-based: Recorded when the cash is received; Accrual-based: Recorded when the sale is made
b) Cash-based: Recorded when the sale is made; Accrual-based: Recorded when the cash is received
c) Both methods record the transaction at the same time
d) Neither cash-based nor accrual-based accounting records credit card transactions

Answer 1

In cash-based accounting, the sale would be recorded when the cash is received, while in accrual accounting, the sale would be recorded when the sale is made.

Step-by-step explanation:

In cash-based accounting, the transaction would be recorded when the cash is received from the customer. This means that the sale would be recorded at a later date when the customer makes the payment to the seller. On the other hand, in accrual accounting, the transaction would be recorded when the sale is made, regardless of when the cash is received. This means that the sale would be recorded immediately when the customer purchases the TV with the credit card.

Therefore, the correct answer is b) Cash-based: Recorded when the sale is made; Accrual-based: Recorded when the cash is received.