Under accrual accounting, which of the following is/are correct?
I. Revenues are recognized when cash is received.
II. Expenses do not always involve cash flows.
III. Revenues and the related costs are matched in the same period.
IV. The reported income is a good indicator of the firm's current performance.
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A. B. C. D.A
Accrual accounting requires that revenues and gains be recognized when earned and expenses and losses be recognized when incurred. Hence, revenue recognition is completely separate from cash flows. In the sales process, the earnings process is completed when goods are delivered and that's when revenue is recognized under accrual accounting.