Question

For income measurement ______ basis of accounting is followed.

Options

• Accrual

• Cash

• Both of these

• None of these

Answer 1

For income measurement Accrual basis of accounting is followed.

Explanation:

The income statement is created on an accrual basis (and not on cash basis). Furthermore, it covers certain non-operating items (such as interest paid, profit/loss on sale of fixed assets, and so on) as well as non-cash items (such as depreciation, goodwill to be written-off, and so on).