Question

How will you recognise revenues and expenses under accural basic of accounting?

Answer 1

How will you recognise revenues and expenses under accural basic of accounting

Answer 2

ANSWER :

Under Accrual Basis of Accounting, revenues are recorded or credited to the period in which they are earned irrespective of whether the same has actually been received or not. Similarly, expenses are charged to the period in which they relate, irrespective of the fact that they have actually been paid or not.

• Accrual Basis of Accounting recognizes revenue as being earned at the point of sale or with the performance of a service. Also, expenses are recognized at the point of time when the expenses are incurred for earning the revenue.

❖ Accrual Basis of Accounting is a method of accounting which takes into account all transactions taking place during a particular accounting period irrespective of whether the same has actually been received/paid or not. It takes into account revenues and expenses as and when they are earned or incurred, not as cash received or paid respectively.

➻ Under Accrual Basis, all adjustments such as outstanding and prepaid expenses, accrued income etc. are to be adjusted accordingly for ascertaining the result of the operation.