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    Question

    “Revenues and expenses must be recorded in the accounting period in which they were earned or incurred, no matter when cash receipts or outlays occur”. This is followed as per which of the following accounting methods?

    A Cash basis accounting Correct Answer Incorrect Answer
    B Tax basis accounting Correct Answer Incorrect Answer
    C Revenue basis accounting Correct Answer Incorrect Answer
    D Mercantile basis accounting Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    The Mercantile Basis, also known as the accrual basis, is an accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash is actually received or paid out. It recognizes revenue when it is earned, regardless of when the payment is received, and recognizes expenses when they are incurred, regardless of when the payment is made.

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