Question

Porite Company recognizes revenue in the period in which it records an asset for the related accounts receivable, rather than in the period in which the accounts receivable is collected in cash. Porite's practice is an example of:________a) cash basis accountingb) accrual accountingc) the matching principled) economic entity

Answer 1

Answer:

accrual accounting

Explanation:

The accrual accounting technique recognizes income and expenses in the period they were earned or incurred. Revenue is recorded in the financial year that the sales invoice was generated and not when payment is received.  An expense is recorded in the same period that the economic activity occurred, not when payment was made.

The accrual accounting technique applies the matching concept, where revenues and expenses are recognized the same period that their related economic transactions happened. The accrual method is one of the two accounting techniques. The cash method is the other technique, it recognizes income and expenses when payments change hands.