Which one of the following statements is correct? Recognition of income and expenses occurs at the point when:
A)The annual accounts are prepared.
B)The quarterly VAT return is due.
C)Goods or services are supplied.
D)Goods or services are paid for.

Question

Quizplus · Accepted Answer

Recognition of income and expenses occurs at the point when goods or services are supplied, according to the accrual basis of accounting. This means that income is recognized when the goods or services are delivered, regardless of whether payment has been received yet, and expenses are recognized when the goods or services have been received, regardless of whether payment has been made yet. The preparation of annual accounts and VAT returns are related to reporting and compliance, but do not necessarily determine the recognition of income and expenses. Payment for goods or services is important for cash flow purposes, but does not determine the timing of recognition under the accrual basis.

Which One of the Following Statements Is Correct? Recognition of Income