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

Question

Quizplus · Accepted Answer

Recognition of income means identifying that revenue has been earned and determining the amount of revenue to be included in the income report, as part of the profit calculation. It does not necessarily mean that cash has been received or that the transaction has been completed. The realisation convention is still an important concept in accounting, but it is not a replacement for the income recognition criteria in the Conceptual Framework. Income from credit sales is recognised when the sale has been made, regardless of when the cash is received. Therefore, statement C is incorrect.

In Relation to the Recognition and Realisation of Income, the Statement