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      Question

      Advance amount received from customers is not considered

      as sale. It is based on which concept?
      A Conservatism Correct Answer Incorrect Answer
      B Consistency Correct Answer Incorrect Answer
      C Accrual Correct Answer Incorrect Answer
      D Money Measurement Correct Answer Incorrect Answer

      Solution

      The accrual accounting concept recognizes revenue when it is earned and expenses when they are incurred, regardless of the timing of cash transactions. When an advance amount is received from customers, it represents a liability until the goods or services are delivered. It is only considered as a sale when the revenue is earned, which aligns with the accrual accounting principle.

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