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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. Expenses are recognised in the statement of profit or loss in the same period as the related sales
Explanation:
The accruals concept in accounting dictates that expenses should be matched with the revenues they help generate, regardless of when the cash transactions occur. This means that expenses are recorded in the same accounting period as the income they relate to, ensuring accurate financial reporting.
- Tags: Accounting Concepts, Accruals, Financial Reporting
- Level: Level 1
- Topic: Basics of Business Finance and Financial Markets
- Series: MAY 2024
- Uploader: Dotse