Practice question · Sort into groups
Cash-basis or accrual-basis? When is revenue recognized?
Groups: Cash basis · Accrual basis
- Revenue recorded when goods are delivered
- Expense recorded when the bill arrives from the supplier
- Expense recorded only when the cheque clears
- Revenue recorded when the customer pays
Hints
- One basis follows the economic event, the other follows the money.
- Published statements use the one that matches effort to reward.
Show the answer
Cash basis: Revenue recorded when the customer pays, Expense recorded only when the cheque clears
Accrual basis: Revenue recorded when goods are delivered, Expense recorded when the bill arrives from the supplier
Why
Accrual = when it happens; cash = when money moves. Published financial statements use accrual because it matches effort to reward within the period.
Practise Recording Transactions
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