Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Under which type of accounting is the payment of a liability recorded when the cash is actually paid, rather than when the obligation is incurred?

Accrual-basis accounting

Cash-basis accounting

Managerial accounting

Tax accounting

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Verified step by step guidance

Understand the key difference between accrual-basis accounting and cash-basis accounting. Accrual-basis accounting records transactions when they are incurred, regardless of when cash is exchanged, while cash-basis accounting records transactions only when cash is received or paid.

Identify the specific scenario described in the problem: the payment of a liability is recorded when cash is actually paid, not when the obligation is incurred.

Match this scenario to the definition of cash-basis accounting, as it aligns with the principle of recording transactions based on cash flow rather than the timing of the obligation.

Eliminate the other options: Accrual-basis accounting does not apply because it records obligations when incurred, not when paid. Managerial accounting focuses on internal decision-making and is not relevant to this scenario. Tax accounting pertains to tax reporting and compliance, which is also unrelated to the specific cash payment timing described.

Conclude that the correct type of accounting for this scenario is cash-basis accounting, as it directly corresponds to the principle of recording payments when cash is exchanged.