Question

Adjustment of accrued/outstanding income/expenses is not necessary in ______ system of accounting.

• A. Mercantile
• B. Cash
• C. Double Entry
• D. All the three

Answer 1

Answer: (B)

Cash

There are two methods of accounting on the basis of business transactions are recorded i.e. cash system and accrual system.

If the transactions are recorded in books of account when cash is physically received or paid is known as cash system of accounting irrespective of the period of revenue or expense.

Hence booking of expense is occur only when cash is paid or received against the service/income. There is no requirement of passing any adjustment entry for booking of outstanding expense or income.