Question

Accrual basis accounting recognizes _____ when earned and records.

A) Expenses
B) Revenues
C) Equity
D) Liabilities

Answer 1

Accrual basis accounting recognizes revenues when earned, following the principle of matching revenues with the period they are earned in, and similarly records expenses when they are incurred.

Step-by-step explanation:

Accrual basis accounting recognizes revenues when earned and records them. This accounting method matches income to the time period in which the income was earned, rather than when the cash is actually received. In the same manner, expenses are recognized when they are incurred, regardless of when they are paid. This principle ensures that financial statements reflect the true financial position of the company at a given point in time.