Question

An enterprise follows accrual basis of accounting and

Q: Answer-An enterprise follows accrual basis of accounting and records revenue when it is earned and expenses...

Since the goods are not yet delivered, the amount cannot be treated as revenue. Its a liability until the revenue is earned.

records revenue when it is earned and expenses when incurred. A client makes an advance payment of ₹1,00,000 for goods to be delivered next quarter. How should this transaction be treated in the books?

A As revenue of current period

B As deferred revenue (liability)

C As capital receipt

D As trade receivable

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An enterprise follows accrual basis of accounting and

Solution