Question

Which of the following would be referred to as "accruals?" (Select all that apply.) A. Cash paid prior to expenses being incurred B. Goods and services provided, not yet collected C. Expenses incurred, not yet paid D. Cash collected prior to goods or services being provided

Answer 1

Answer:

Option B and C are correct.

Explanation:

Accrual basis deals with the liability and assets recognition is met for the consideration received and delivered respectively. So if we had made credit sale of goods or services to our customer and had not yet recognised the sale then it must be recognised and an equal receivable because this amount receivable from the customers. This is because the consideration is paid from one side and now the other has a duty to pay the other in compensation of the service received. When the customer receives the consideration from the supplier then he must recognise expense and liability because he has to pay the supplier.