Home › ACCA › Financial Accounting › Accrual Basis Of Accounting › Under the accrual basis of accounting, when is r…
Under the accrual basis of accounting, when is revenue from a completed service recognised in the statement of profit or loss?
AIn the period the service is performed, irrespective of cash receipt
BIn the period the related cash payment is actually received in full
CIn the period the customer is first invoiced for the completed work
DIn the period the customer first agrees to undertake the engagement
Answer & Solution
Correct answer: A. In the period the service is performed, irrespective of cash receipt
1. The accrual basis recognises economic events when they occur, not when cash moves.
2. Revenue is reported in the period in which it is earned, i.e. when the service is performed.
3. Therefore option A is correct; receipt timing is irrelevant.
4. B describes the cash basis, while C and D point to invoicing or agreement, neither of which is the earning event.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.1 "Accrual Basis of Accounting", p.53_