15.3.9. Accrual Concept

Try these first

1. 1.

   Define the Accrual Concept in accounting.

   Hint

   Think about when transactions actually occur.

2. 2.

   What is the primary difference between Accrual Accounting and Cash Basis Accounting?

   Hint

   Consider the timing of recording transactions.

3. 3.

   What does the Accrual Concept in accounting state?

   • Revenues are recognized when cash is received
   • Revenues are recognized when earned
   • Expenses are recorded at year-end

   Hint

   Think about when transactions are actually recognized.

4. 4.

   In accrual accounting, when is expense recognized?

   • True
   • False

   Hint

   Consider the timing of expense recognition.

5. 5.

   A freelancer completes a graphic design project in October worth ₹80,000 and sends the invoice, but the payment is received in December. How should this be recorded?

   Hint

   Identify the completion date of the service and apply the accrual concept.

6. 6.

   A company pays an annual insurance premium of ₹24,000 in January for coverage that runs through December. How should this be reported in each month’s financial statements?

   Hint

   Remember to spread costs over the period they're applicable.