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CSEET · Fundamentals of Accounting · Basic Concepts and Principles of Accounting

According to the ICAI Framework for the Preparation and Presentation of Financial Statements, under the accrual basis of accounting the effects of transactions are recognised when:

Under the accrual basis, transactions and events are recognised when they occur, not when cash or a cash equivalent is received or paid. They are recorded and reported in the periods to which they relate. Recognition tied to cash movement describes the cash basis instead.

  1. ACash or a cash equivalent is received or paid
  2. BThey occur, and not when cash or a cash equivalent is received or paidCorrect
  3. CThe related invoice is approved by the auditor
  4. DThe financial year ends

Explanation

The Framework states that under the accrual basis the effects of transactions and other events are recognised when they occur, not when cash or a cash equivalent is received or paid. The option tied to cash receipt or payment describes the cash basis, so it is wrong.

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