Question

Which of the following shall not be recorded if the entity is following cash basis of accounting?

• A. Amount of interest Mr. X has promised to pay in the next year
• B. Amount of interest Mr. X has paid in this year
• C. Sale of goods for cash in the year
• D. Amount received from bank in form of loan

Answer 1

The correct option is A

Amount of interest Mr. X has promised to pay in the next year

Cash accounting is an accounting method in which receipts are recorded during the period they are received, and expenses are recorded in the period in which they are actually paid. Hence, out of the above interest promised to paid by Mr. X shall be recorded in the year of payment & not in this year.