CA Foundation · Accounting · Theoretical Framework
Sharma Enterprises sold goods worth ₹80,000 on credit in March 2025, and delivered them in March. The customer paid in April 2025. Under the accrual basis of accounting, in which period is the ₹80,000 recognised as revenue?
Revenue is recognised in March 2025. Under accrual accounting, income is recorded when it is earned, which is when goods are delivered and the customer becomes liable to pay, irrespective of the later cash receipt in April.
- AApril 2025, when cash is received
- BMarch 2025, when the sale is madeCorrect
- CBoth March and April, in two equal parts
- DThe period in which the debt is written off
Explanation
Accrual accounting recognises revenue when it is earned, i.e. when goods are delivered and the right to receive money arises, not when cash is received. So the sale belongs to March 2025. April would be correct only under the cash basis.
Did you get it right without looking?
One question tells you little. A timed set on Theoretical Framework shows your real accuracy, how long you take and where you lose marks.
More Theoretical Framework questions
- Mira Ltd. recognized revenue of ₹50,000 from a service contract in the current year, although cash was received only for ₹40,000. The remain…
- Which of the following is an example of a transaction that is NOT recorded in the books of a business, because of the money measurement conc…
- The Conceptual Framework for Financial Reporting prescribes that financial statements should present information that is useful to a wide ra…
- Ganesh Stores bought goods costing ₹1,20,000 during the year, of which goods costing ₹30,000 remain unsold at the year-end. The net realisab…
- Mehta Traders records the purchase of a delivery van for its own use as a fixed asset and not as an expense of the year, even though it was …
- Under the Conceptual Framework, comparability as a qualitative characteristic requires that financial information prepared by different enti…