PRC-1 · Chapter 1 · Question 26 of 100
'Sterling Services' completed a consulting project for a client in December but did not receive the cash payment until February of the following financial year. The accountant recognized the revenue in December. This approach strictly follows which basis of accounting?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Accrual basis
Explanation
The accrual basis of accounting dictates that income and expenses are recognized when they are earned or incurred, regardless of when the physical cash is actually exchanged.
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