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WAEC Financial Accounting 2015 Question 45

Question 45

Public Sector Accounting

Which of the following relates to cash basis of accounting?

  1. A.Accruals and prepayments are considered.
  2. B.Debtors and creditors are recorded.
  3. C.Fixed assets are written off in the year of purchase.
  4. D.Profits are maximized.
Show the answer and explanation

Answer: C (Fixed assets are written off in the year of purchase.)

Explanation

Under the cash basis only cash paid and received is recorded, so the full cost of a fixed asset is treated as spending in the year it is bought.