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- 1 Marks
Question
Which of the following correctly describes the accruals concept in accounting?
A. Expenses are recognised in the statement of profit or loss in the same period as the related sales.
B. Income is recognised in the statement of profit or loss when cash is paid.
C. Sales are recognised in the statement of profit or loss when the related expenses are paid.
D. Expenses are recognised in the statement of profit or loss as they are paid.
E. Income and expenses are recognised in the statement of profit or loss as they arise.
Answer
Answer: A
Explanation: The correct answer is A. Under the accruals concept, income and expenses are recognised in the financial statements in the period in which they occur, regardless of when cash transactions take place. This ensures that revenue and the associated costs are matched in the same accounting period.
- Tags: Accounting principles, Accruals Concept, Financial Reporting
- Level: Level 1
- Topic: Bases of Accounting: Accrual vs. Cash
- Series: MAY 2024
- Uploader: Dotse