ACCA FA · Chapter 2 · Question 7 of 10
Under the accruals (accrual basis) concept, when are the effects of transactions recognised?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) In the period in which they occur, even if the related cash is received or paid in a different period
Explanation
Accrual accounting reports the effects of transactions and events in the periods in which those effects occur, regardless of when cash changes hands. This gives a better basis for assessing performance than cash accounting, and is why accruals and prepayments are recorded at the period end.
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