A trader has made a sale of Rs 75 500 out of which cash sales amounted to Rs 25 500 He showed trade ...........

Principles of Accounting & Financial Management Concepts of Accounting

A trader has made a sale of Rs.75,500 out of which cash sales amounted to Rs.25,500. He showed trade receivables on 31-3-2014 at Rs.25,500. Which concept is followed by him?

Going Concern

Cost

Accrual

Money measurement

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Explanation:

The general concept of accrual accounting is that economic events are recognized by matching revenues to expenses (the matching principle) at the time when the transaction occurs rather than when payment is made or received. This method allows the current cash inflows or outflows to be combined with future expected cash inflows or outflows to give a more accurate picture of a company's current financial position.

Accrual accounting is considered the standard accounting practice for most companies except for very small businesses and individuals. The Internal Revenue Service (IRS) allows qualifying small businesses (less than $25 million in annual revenues) to choose their preferred method.1 The accrual method does provide a more accurate picture of the company's current condition, but its relative complexity makes it more expensive to implement.