Multiple choice

'Advance received from customers is not taken as sale'. This is based on

  1. money measurement concept

  2. accrual concept

  3. consistency concept

  4. conservatism concept
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The accrual concept states that revenue should be recognized when it is earned, not when cash is received. An advance from customers represents cash received but service not yet rendered, so it cannot be recognized as sale/revenue. It is recorded as a liability (unearned revenue) until the goods are delivered or services are performed.

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