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CSEET · Fundamentals of Accounting · Basic Concepts and Principles of Accounting

According to the ICAI Framework, financial statements prepared on the accrual basis are most useful to users because they inform them of:

Accrual-based financial statements tell users about past cash receipts and payments and also about obligations to pay cash in future and resources that will bring in cash. This gives the most useful information for economic decisions, unlike a cash-only view.

  1. AOnly past events involving the payment and receipt of cash
  2. BPast cash events as well as obligations to pay cash in future and resources representing cash to be received in futureCorrect
  3. COnly the market value of the enterprise's shares
  4. DOnly the amount of tax payable to the government

Explanation

The Framework states that accrual-based statements inform users not only of past payments and receipts of cash but also of future obligations to pay cash and resources that represent cash to be received. Hence option 1 is complete. Option 0 describes only the cash basis and omits the future-oriented information.

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