Multiple Choice
Which of the following is an advantage of using the balance sheet approach to determine the compensation of expatriates?
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1. Introduction to Accounting
Types of Accounting
Multiple Choice
A loan in which the borrower buys property under a land contract would be classified as which type of accounting?
A
Installment accounting
B
Fund accounting
C
Cash accounting
D
Accrual accounting
Verified step by step guidance1
Understand the nature of the transaction: A land contract involves the borrower purchasing property and making payments over time, which is key to determining the accounting method.
Review the definitions of the accounting methods provided: Installment accounting, fund accounting, cash accounting, and accrual accounting. Each has distinct characteristics and applications.
Focus on installment accounting: This method is typically used when payments are made in installments over time, and revenue is recognized as payments are received.
Compare installment accounting with the other methods: Cash accounting recognizes transactions when cash is exchanged, accrual accounting recognizes transactions when they occur regardless of cash flow, and fund accounting is used primarily by non-profits and government entities to track funds for specific purposes.
Conclude that the correct classification for a loan under a land contract, where payments are made over time, aligns with the principles of installment accounting.
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