Cash, Modified Cash, Income Tax

Question 1

How do cash based financial statements operate?

Answer 1

• Based solely on cash receipts and disbursements
• Cash received is revenue and cash paid is an expense
• Balance sheet only shows Cash and Equity

Question 2

How do modified cash basis financial statements operate?

Answer 2

-As a combination of elements of cash basis and accrual basis accounting

Question 3

When is modified cash basis acceptable?

Answer 3

-If modification has substantial support in practice

Question 4

What is required if modified cash basis used?

Answer 4

-All RELATED accounts must be reported using same basis of accounting

Question 5

Under income tax basis of accounting, are nontaxable receipts and nondeductible payments recognized on Statement of Revenues and Expenses?

Answer 5

-Yes in one of 3 ways