GCEFinancial AccountingAccounting Concepts and Conventions2020

Which of the following best describes the 'accrual concept' in financial accounting?

ARevenue and expenses are recorded only when cash is received or paid
BRevenue is recognised when earned and expenses when incurred, regardless of cash flowCORRECT
CTransactions are recorded at their historical cost irrespective of market value
DAll material information must be disclosed in the financial statements
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Why the answer is B, and why the others tempt you.
The accrual concept (also called the matching concept) states that revenues should be recognised when they are earned and expenses when they are incurred, not necessarily when cash changes hands. This ensures that income and expenditure are matched to the correct accounting period. It is the basis for recording prepayments, accruals, debtors, and creditors.
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