Answered: A sole proprietorship is on the cash…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Related questions

Question

A sole proprietorship is on the cash basis for income tax reporting purposes. All of the following will reduce taxable income in the current year except:

Group of answer choices

Close the business between Christmas and New Year’s Day.

Ask customers not to pay their bills until January of next year.

Prepay January rent and utility bills in December

Purchase and pay for a piece of land in December that was originally planned to be purchased in January.

Flag question: Question 5

Expert Solution

Step 1

There are two approaches in accounting one is accrual basis which records incomes and expenses as accured for the period even though not received in cash.

In cash basis incomes and expenses are recorded only when they are incurred means cash received[incomes] or paid[expenses].

On the basis of above we will answer the above MCQ as under --

Please refer step 2