Question

What is the correct answer?  

When converting an income statement from a cash basis to an accrual basis, expenses: Multiple Choice Exceed cash payments to suppliers. Equal cash payments to suppliers. Are less than cash payments to suppliers. May exceed, equal or be less than cash payments to suppliers.

Answer 1

Correct answer-----------May exceed, equal or be less than cash payment to supplier.

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If cash payment for expense are made as and when expense are incurred there will be no difference between cash and accrual basis expenses.

If cash paid for expense are made at later date then expense as per accrual income statement will be more than expense as per cash basis.

If cash paid for expense are made in advance then expense as per accrual income statement will be less than expense as per cash basis.

So whether accrual income statement expense are different or same as cash basis income statement depends of various circumstances.