Financial Accounting Standards Board (FASB) - Overview of US GAAP

Question 1

4. When a set of financial statements is prepared using the cash basis or the modified cash basis of accounting, which one of the following is least likely to be an appropriate financial statement title?
   - Statement of Cash Receipts and Cash Disbursements.
   - Balance Sheet.
   - Income Statement.
   - Statement of Financial Position.

Answer 1

A.Statement of Cash Receipts and Cash Disbursements.

When the cash basis or the modified cash basis of accounting is used, the title Statement of Cash Receipts and Cash Disbursements is a likely and appropriate title for what would be called an Income Statement when accrual accounting is used. The title Income Statement should be reserved for use when accrual basis accounting is used.