Multiple choice

If interest for April, 2005 is received in March, 2005, then it will be taken to the profit and loss account of the financial year ending on

  1. March, 2006

  2. March, 2005

  3. half in March, 2005 and half in March, 2006

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under the accrual and matching concepts, income must be recognized in the period it is earned. Since the interest relates to April 2005, it belongs to the financial year starting in April 2005 and ending in March 2006, even if the cash was received earlier.

Keep practicing — related questions