In relation to the recognition and realisation of income, which statement is correct?
A)Recognition of income means including it in the income statement as part of the profit calculation.
B)Income from a credit sale is normally recognised in the statement of financial performance when the cash is received.
C)The realisation convention has replaced the income recognition criteria contained in the Conceptual Framework.
D)All of the statements are correct.

Question

Quizplus · Accepted Answer

Recognition of income means including it in the income statement as part of the profit calculation. This statement is correct as per the Conceptual Framework for Financial Reporting, which states that income is recognised when an increase in future economic benefits related to an increase in an asset or a decrease in a liability has arisen, and that it can be reliably measured. The recognition of income can be done without the receipt of cash, and it is recognised in the income statement as part of the profit calculation. Option B is incorrect because the recognition of income is not based on the receipt of cash, and option C is incorrect as the realisation principle is a part of the income recognition criteria.

In Relation to the Recognition and Realisation of Income, Which