Question

A firm receives Rs. 20,000 on 15th March 2020 as an advance for sale of goods to be delivered on 25th April 2020, it would not be included in the sales figure for the year ended 31st March 2020, owing to the concept of: *
1 point
Going Concern concept
Revenue recognition concept
Cost concept
Accounting period concept
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Answer 1

Explanation:

revenue recognition concept

Answer 2

Answer:

The correct answer is Option B i.e. Revenue Recognition Concept.

Explanation:

i) Going Concern concept refers to the ability of a company to continue its operations and avoiding bankruptcy despite poor financial state. This concept is irrelevant here.

ii) Revenue Recognition concept refers to the conditions under which certain sales amount is to be accounted. It states that the earning should only be accounted when the related sales function has been performed and not when the amount is received. Hence, as in this case, irrespective of when the advance was received, the amount will be accounted only when the goods will be delivered.

iii) Cost concept refers to the financial valuation of all goods and assets and is irrelevant here.

iv) Accounting period concept refers to the time period decided for the timely accounting reports and is irrelevant here.

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