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According to accrual concept of accounting, financial or business transaction is recorded:
- a)when cash is received or paid
- b)when transaction occurs
- c)when profit is computed
- d)when balance sheet is prepared
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
According to accrual concept of accounting, financial or business tran...
According to the accrual concept of accounting, a financial or business transaction is recorded: B: when the transaction occurs
The accrual basis of accounting recognizes revenues and expenses when they are earned or incurred, regardless of when the cash transactions actually take place. This approach provides a more accurate picture of a company's financial position and performance by recording the economic activity when it happens, not just when cash changes hands.
The accrual basis of accounting recognizes revenues and expenses when they are earned or incurred, regardless of when the cash transactions actually take place. This approach provides a more accurate picture of a company's financial position and performance by recording the economic activity when it happens, not just when cash changes hands.
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According to accrual concept of accounting, financial or business tran...
Accrual Concept of Accounting
Definition: Accrual concept of accounting is a principle that states that financial transactions should be recorded when they occur, regardless of when the cash is received or paid.
Explanation: The accrual concept of accounting is based on the matching principle, which states that expenses should be recognized when they are incurred and revenue should be recognized when it is earned.
Example: Let's say a company provides services to a customer in December but does not receive payment until January. According to the accrual concept of accounting, the company should record the revenue in December when the service was provided, even though the cash was not received until January.
Advantages:
- Provides a more accurate picture of a company's financial health by matching revenues and expenses in the same accounting period.
- Helps in better decision making by providing timely and accurate information.
- Improves comparability between companies.
Disadvantages:
- Can be complex and difficult to implement.
- Requires a good understanding of accounting principles and procedures.
- Can be time-consuming and expensive to maintain.
Conclusion: The accrual concept of accounting is an important principle that helps in providing a more accurate and realistic view of a company's financial health. It is based on the matching principle and requires transactions to be recorded when they occur, regardless of when the cash is received or paid. This principle has both advantages and disadvantages and requires a good understanding of accounting principles and procedures.
Definition: Accrual concept of accounting is a principle that states that financial transactions should be recorded when they occur, regardless of when the cash is received or paid.
Explanation: The accrual concept of accounting is based on the matching principle, which states that expenses should be recognized when they are incurred and revenue should be recognized when it is earned.
Example: Let's say a company provides services to a customer in December but does not receive payment until January. According to the accrual concept of accounting, the company should record the revenue in December when the service was provided, even though the cash was not received until January.
Advantages:
- Provides a more accurate picture of a company's financial health by matching revenues and expenses in the same accounting period.
- Helps in better decision making by providing timely and accurate information.
- Improves comparability between companies.
Disadvantages:
- Can be complex and difficult to implement.
- Requires a good understanding of accounting principles and procedures.
- Can be time-consuming and expensive to maintain.
Conclusion: The accrual concept of accounting is an important principle that helps in providing a more accurate and realistic view of a company's financial health. It is based on the matching principle and requires transactions to be recorded when they occur, regardless of when the cash is received or paid. This principle has both advantages and disadvantages and requires a good understanding of accounting principles and procedures.
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According to accrual concept of accounting, financial or business tran...
Because accural concept means a transaction is recorded on the basis of itrespective of cash flowjust like credit sales or credit purchases
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According to accrual concept of accounting, financial or business transaction is recorded:a)when cash is received or paidb)when transaction occursc)when profit is computedd)when balance sheet is preparedCorrect answer is option 'B'. Can you explain this answer?
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