A fundamental feature of the Cash Basis of Accounting is that: MCQ with Answer and Explanation

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A fundamental feature of the Cash Basis of Accounting is that:

A. Depreciation is recorded monthly

B. Prepaid expenses are shown as assets

C. Outstanding expenses are recorded as liabilities

D. Income is recorded only when cash is received

Answer: Option D

Solution (By JKSSB Mock Tests)

The cash basis recognizes revenues and expenses strictly based on the actual flow of cash, ignoring accruals.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

The primary objective of cost accounting is:

A. To prepare financial accounts

B. To ascertain cost and control cost

C. To ascertain selling price

D. To calculate tax

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Correct Answer: Option B

Explanation:
Cost accounting focuses on recording, classifying, and controlling costs to aid management decisions.

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Question #2

'Angel Tax' is a term used for tax on:

A. Income of angels

B. Religious institutions

C. Investments in startups by angel investors above fair market value

D. Charitable trusts

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Correct Answer: Option C

Explanation:
Angel tax refers to Section 56(2)(viib) tax on excess share premium received by closely held companies.

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Question #3

A trader paid carriage on purchase of goods. It will be debited to:

A. Carriage Outward A/c

B. Carriage Inward A/c

C. Profit & Loss A/c

D. Trading A/c (Direct expense)

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Correct Answer: Option B

Explanation:
Carriage paid on purchases is a direct expense, debited to Carriage Inward A/c, and later transferred to Trading A/c.

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