Which fundamental accounting concept stipulates that revenue and costs are recognized as they are earned or incurred?
A) Consistency
B) Comparability
C) Accruals
D) Prudence

Question

Quizplus · Accepted Answer

The concept of accruals requires that revenue and costs are recognized as they are earned or incurred, regardless of when the cash transaction takes place. This allows for a more accurate reflection of a company's financial performance and obligations.

Alternatively:

Answer: C
 The accrual basis of accounting requires revenue and expenses to be recognized when they are earned or incurred, not when cash is received or paid out. This matches revenues with their related expenses and provides a more accurate picture of a company's financial performance over a given period of time.

Which Fundamental Accounting Concept Stipulates That Revenue and Costs Are