Accrual concept

                                                                                                                                      

MBA

Accounting for Managers

ASSIGNMENT

 

Course Code: MMPC-004

Assignment Code: MMPC-004/TMA/JULY/2022 

Coverage : All Blocks

1. Explain the following accounting concepts

(d) Accrual concept

The accrual concept is a fundamental accounting principle that recognizes and records revenue and expenses in the financial statements of a business when they are earned or incurred, regardless of when cash is received or paid. This concept aims to provide a more accurate representation of a business's financial position and performance by matching the related revenue and expenses in the same accounting period. 

Under the accrual concept, revenue is recognized when it is earned, and expenses are recognized when they are incurred, irrespective of whether cash has been received or paid. This means that revenue is recorded when the business provides goods or services to customers, even if payment has not been received. Similarly, expenses are recorded when they are incurred, even if payment has not yet been made.

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