Question

Which of the following is FALSE regarding Accrual Accounting?

1) Revenues are recorded when earned
2) Accrual accounting follows the matching principle
3) Expenses are recorded as incurred
4) None of the above

Answer 1

The FALSE statement regarding Accrual Accounting is 'None of the above,' since all other options correctly represent the principles of accrual accounting, where revenues and expenses are recorded when they are earned and incurred, respectively.

Step-by-step explanation:

The question relates to the principles of Accrual Accounting, which is the method of accounting where transactions are recorded when they are earned or incurred, regardless of when the cash is actually received or paid.To determine which statement is FALSE regarding Accrual Accounting:Revenues are recorded when earned - This is TRUE, as it reflects the accrual accounting principle that income is recognized when earned, no matter when the money is received.Accrual accounting follows the matching principle - This is TRUE, as the matching principle dictates that expenses should be matched with the revenues they generate in the same period.Expenses are recorded when incurred - This is TRUE, as expenses are recognized when they are incurred, even if the payment has not been made yet.None of the above - This is the correct answer because the other statements are all true representations of accrual accounting principles.