Outstanding expenses are not recorded in ________ accounting.a)Cash Basisb)Accrual basicc)Double entry systemd)None of theseCorrect answer is option 'A'. Can you explain this answer?

Question

Answer

Under the Cash Basis of accounting transactions are recorded only when there is an inflow or outflow of cash. Outstanding expenses means expenses which are yet to be paid (i.e. no change in cash position in respect of such transactions). Hence, under Cash Basis of accounting outstanding expenses are not recorded.

Answer

Outstanding expenses are not recorded in Cash Basis accounting.

Explanation:
Cash Basis accounting is a method of accounting where transactions are recorded only when cash is received or paid. In this method, outstanding expenses are not recorded as they have not been paid yet. Therefore, only actual cash transactions are recorded, and any expenses that have not been paid are not considered.

Advantages of Cash Basis accounting:
- It is simple and easy to maintain.
- It is suitable for small businesses with straightforward transactions.
- It provides a clear picture of actual cash flow.

Disadvantages of Cash Basis accounting:
- It does not provide an accurate picture of the financial position of the business.
- It does not consider outstanding expenses and income, which can result in misleading financial statements.
- It is not acceptable for preparing financial statements for tax purposes.

Conclusion:
Cash Basis accounting is a simple method of accounting that is suitable for small businesses with straightforward transactions. However, it does not provide an accurate picture of the financial position of the business and is not suitable for preparing financial statements for tax purposes.

Answer

Outstanding expenses are future paid expenses so we cant recorded it in cash basis accounting

Answer

A: Cash basis

In cash basis accounting, expenses are recorded when they are paid, rather than when they are incurred. This means that outstanding expenses, which are expenses that have been incurred but not yet paid, are not recorded in the financial statements until they are actually paid.

Cash basis accounting is a simple and straightforward method of accounting that is used by some small businesses and organizations. It is based on the idea that expenses should be recorded when cash is paid out and revenues should be recorded when cash is received. This method is easy to understand and is well-suited for businesses that do not have a lot of inventory or that do not need to closely track the timing of their revenues and expenses.

However, cash basis accounting has some limitations compared to accrual basis accounting, which is the more commonly used method of accounting. Accrual basis accounting records expenses when they are incurred, regardless of when they are paid, and records revenues when they are earned, regardless of when they are received. This method provides a more complete and accurate picture of the financial position and performance of a business, as it takes into account all of the revenues and expenses that have been earned or incurred, regardless of when the cash changes hands.

Answer

It is answer A because outstanding expenses are future paid which is not recorded in cash basis

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