The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is
A) Accrual basis accounting
B) The operating cycle of a business
C) Cash basis accounting
D) The revenue recognition principle
E) The matching principle

Question

Quizplus · Accepted Answer

The approach of recognizing revenues when they are earned and matching expenses to those revenues is known as accrual basis accounting. This approach follows the revenue recognition principle and the matching principle. As per the accrual accounting method, the transactions are recorded when they occur, regardless of the actual cash inflows or outflows.

The Approach to Preparing Financial Statements Based on Recognizing Revenues