Which of the following statements about accrual basis accounting is correct?
A) If a company uses accrual basis accounting, the company should not record revenue until payments is actually received.
B) If a company uses accrual basis accounting, the company should, the company should record expenses in the same period as the revenues they generate.
C) IFRS does not allow accrual basis accounting for external reporting of income.
D) The items reported on the income statement continue to have an impact beyond the current period, whereas the items reported on the balance sheet impact just the current period.

Question

Quizplus · Accepted Answer

Accrual basis accounting requires that expenses and revenues be recorded in the same period, regardless of when the payment is made or received. This ensures that the financial statements reflect the company's true financial position and performance. Option A is incorrect as under accrual basis accounting, revenue is recognized when it is earned, not when payment is received. Option C is incorrect as IFRS does allow accrual basis accounting for external reporting of income. Option D is incorrect as both the income statement and balance sheet items have an impact beyond the current period, but the balance sheet items typically represent assets and liabilities that will last beyond the current period, whereas the income statement items represent revenues and expenses for the current period only.

Which of the Following Statements About Accrual Basis Accounting Is