A business completes consulting work in March but receives payment in April. Under accrual accounting, in which month is the revenue recognised?
Correct answer: B. March, when the work is completed
- A. April, when the cash is received
- B. March, when the work is completed
- C. The month in which the invoice is printed
- D. The month in which the bank confirms payment
Explanation
Accrual accounting recognises revenue when it is earned, not when cash is collected. Since the consulting work is completed in March, the revenue belongs to March.
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Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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