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For a calendar-year company, which of the following would cause accrual basis income to be less than cash basis income? O the balance in current taxes payable decreased during the year O the balance in accounts receivable increased during the year O the balance in prepaid insurance decreased during the year O the balance in accrued payroll decreased during the year

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Answer #1

Answer: The Balance in prepaid Insurance decreased during the year.

Reason: Prepaid Insurance means that insurance related to the future period but full payment has been made earlier. So whenever the prepaid insurance decrease that means insurance expense recognized during that year as per accrual basis which reduce the net income of the company. While there is no effect in the cash basis accounting because in cash basis expenses recognized only when the cash payment was made.

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