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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 inform users of which of the following, in addition to past cash receipts and payments?

Accrual-basis financial statements tell users about past receipts and payments of cash and also about obligations to pay cash in future and resources that represent cash to be received. This is the information most useful to users in making economic decisions.

  1. AObligations to pay cash in the future and resources representing cash to be received in the futureCorrect
  2. BOnly the market value of the owner's personal assets
  3. COnly the tax rates applicable in the coming year
  4. DForecasts of the share price for the next period

Explanation

Paragraph 22 states that accrual-based statements inform users not only of past cash events but also of obligations to pay cash in the future and of resources that represent cash to be received. This makes them more useful for economic decisions. The other options are not stated as outputs of accrual accounting.

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