How are revenues and expenses recognized under the accrual basis of accounting?
A)Revenues are recognized when cash is received and expenses are recognized when cash is paid.
B)Revenues and expenses are recognized equally over a twelve month period.
C)Revenues and expenses are recognized based on the choices of management.
D)Revenues are recognized in the accounting period when the sale is made and expenses are recognized in the period in which they relate to the sale of the product.

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, revenues are recognized in the accounting period when the sale is made regardless of whether cash has been received or not. Expenses are recognized in the period in which they relate to the sale of the product, even if they are paid later. This method provides a more accurate picture of the financial performance of a business as it matches revenues and related expenses in the same period.

How Are Revenues and Expenses Recognized Under the Accrual Basis