ICAEW AF · Chapter 1 · Question 5 of 11
Which of the following best describes the accrual basis of accounting?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The effects of transactions are recorded in the periods in which they occur, even if the cash is received or paid in a different period
Explanation
Under the accrual basis, the effects of transactions and other events are recognised when they occur rather than when the related cash moves. Recording income and expenses only when cash changes hands is the cash basis. Measuring assets at market value is about measurement, not the accrual basis.
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