Question

In cash basis accounting, for tax purposes:

a. Income is recognized when it is actually or constructively received and expenses are recognized when they are actually or constructively incurred, regardless of when paid.
b. Income is recognized when it is earned regardless of when received and expenses are recognized when they are actually or constructively incurred.
c. Income is generally recognized when it is actually or constructively received and expenses are generally recognized when they are paid.
d. The cash basis is not allowed for businesses reported on Schedule C.

Answer 1

Answer: Income is generally recognized when it is actually or constructively received and expenses are generally recognized when they are paid.

Step-by-step explanation:

In cash basis accounting method, it should be noted that revenues are recognized when they are gotten while for the expenses, they are recognized when they are paid out in cash.

The cash basis for of accounting is the opposite of the accrual method of accounting whereby revenue and expenses will be recognized when incurred.