Which of the following is NOT a principle of cash-based accounting? MCQ with Answer and Explanation

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Which of the following is NOT a principle of cash-based accounting?

A. Revenue is recognized when earned

B. No record of credit transactions

C. Revenue is recognized when cash is received

D. Expenses are recognized when cash is paid

Answer: Option A

Solution (By JKSSB Mock Tests)

Recognizing revenue when earned is a principle of accrual accounting. Cash-based accounting only recognizes revenue when cash is actually received.

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

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Question #1

Which of the following is a direct expense?

A. Factory rent

B. Advertising

C. Carriage inwards

D. Office salaries

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Correct Answer: Option C

Explanation:
Carriage inwards is a direct expense because it is directly attributable to the purchase of goods and bringing them to the place of business.

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Question #2

The 'Engagement Letter' in audit is:

A. Tax notice

B. A written agreement between auditor and client detailing scope and terms of audit

C. The audit programme

D. A letter of appointment of auditor

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Correct Answer: Option B

Explanation:
Engagement letter formalises the audit engagement.

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Question #3

In a Cash Book with discount columns, the total of the 'Discount Received' column is posted to the:

A. Credit of Cash A/c

B. Credit of Discount Received A/c

C. Debit of Discount Received A/c

D. Debit of Creditors A/c

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Correct Answer: Option B

Explanation:
Discount Received is a gain (nominal account rule: credit all gains), so the periodic total is posted to the credit side of the Discount Received ledger account.

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