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Write short-note on: (1) Accrual Concept:

Vidyadip · Accepted Answer

As per this concept, the revenue or expenses should be recognised andrecorded in books of accounts as and when it is earned or it accrues or spent irrespectiveof the time or period of receipt or payment. In the same way expenses should be recognised and recorded in accounting as and when it is incurred irrespective of the period of payment there of. There are two systems of accounting : (1) Cash basis (2) Accrual basis. In cash hethe revenue is recognised only when cash is received & expenses or costs are recognised only when cash is actually paid. Only some professional like doctors, lawyers and charterd accountants follow cash system of accounting. For companies, it is mandatory to follow accrual system of accounting. Most of the enterprises follow accrual system in which revenue or costs are recognised as they are earned or incurred irrespective of whether cash is received or not. e.g. (1) When goods are sold on credit to a customer, the revenue should be recognised in accounting when such goods are sold even though cash is not yet received for such sale (2) Even though cash is received, advance received against sale of goods is not recorded as sales until the goods are supplied against the advance it accrues irrespective. Revenue like interest, rent, commission, dividend, brokerage etc. are based on the time factor. So, after completion of that period, the revenue is recognised for that period of receivable interest

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