Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.  True False

True or False Analysis

1. Understanding Cash Basis Accounting
   The cash basis of accounting recognizes revenues and expenses only when cash is exchanged. This means that transactions are recorded when cash is received or paid out, not when they are incurred.

2. Impact on Prepaid, Unearned, and Accrued Items

   • Prepaid Items: Expenses paid in advance are not recognized until cash is actually spent under cash basis accounting.
   • Unearned Revenue: Money received for services not yet performed is not recognized as revenue until cash is received, regardless of when the service is performed.
   • Accrued Items: Expenses incurred but not yet paid are not recorded until payment is made.

3. Conclusion
   Since the cash basis does not make adjustments for prepaid, unearned, or accrued items, the statement is True.

Final Answer

True: Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.