Question

Which of the following statements about accrual basis accounting is correct? If a company uses accrual basis accounting, the company should not record revenue until payments is actually received. If a company uses accrual basis accounting, the company should record expenses in the same period as the revenues they generate. IFRS does not allow accrual basis accounting for external reporting of income. 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.

Answer 1

Answer: If a company used accrual basis accounting the company should record expenses in the same period as the revenues they generate.

Explanation:

The accrual basis states that expenses and Income should be reported in the same period, income is accounted for when earned whether payment is received or not and expenses is recorded once Incurred whether payment is made or not and both are matched together.

IFRS allowed accrual basis of accounting, items in the income statement only have impact in the current period while items reported in the balance sheet have impact beyond the current period.