Question

When should revenue and expense be recognized in the accrual basis? pls IN YOUR WORD.

Answer 1

Question

Answer :

Under the accrual basis of accounting the organisation follows the one of the fundament principle is Matching principle of accounting. in which the revenue is recognised as and when the        revenue is earned ( it means the goods are delivered or services are provided ), or revenue is received or receivable ( it means the cash is received or to be received in the future) in the reporting accounting period for which the financial statements are prepared.

And in the same way the expenses are recognised under the accrual basis of accounting related to the revenue when the expenses are incurred for the reporting accounting period , not when the actual payment is made for the expenses. We have entered the provisions for the expenses for whom we had not made the payment in the current accounting period like salary payable, utilities payable, rent payable for the last month of the reporting period even if we had made the payment in the next reporting period . ( if closed our reporting period for December then we have to recognised all the December month expenses in the month of December even if we paid cash for these expenses in the month of January next month)