The main difference between cash basis and accrual basis is: MCQ with Answer and Explanation

Question

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The main difference between cash basis and accrual basis is:

A. Timing of recognition of revenues and expenses

B. Trial balance preparation

C. Use of vouchers

D. Recording of transactions

Answer: Option A

Solution (By JKSSB Mock Tests)

Cash basis recognises on cash flow; accrual on earning/incurring.

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

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Question #1

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In a bank reconciliation, a 'Direct deposit by customer' into bank not recorded in cash book will:

A. Be adjusted in passbook

B. No effect

C. Decrease cash book balance

D. Increase cash book balance

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Correct Answer: Option D

Explanation:
When starting with cash book balance, direct deposit increases bank balance, so add to cash book to reconcile with passbook.

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Question #2

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The difference between actual overhead and absorbed overhead is called:

A. Waste

B. Standard cost

C. Budgeted cost

D. Under/over absorption

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Correct Answer: Option D

Explanation:
If absorbed overheads are less than actual, under-absorption; if more, over-absorption.

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Question #3

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The 'Reconciliation of Cost and Financial Accounts' is necessary because:

A. Both use same principles

B. Different bases of valuation and items included lead to different profit figures

C. Tax requirement

D. Audit requirement

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Correct Answer: Option B

Explanation:
Differences arise due to items like notional rent, depreciation method, etc., so reconciliation explains the divergence.

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

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