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      Question

      Which accounting concept restricts a firm from booking

      advance amount received from customers as a sale in the books of accounts?
      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
      E Accounting Period 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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