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JIA Quiz

Which of the following best describes the core principle of accrual basis accounting?

A. Revenues and expenses are recorded only when cash is physically received or paid

[X] Incorrect. This describes cash basis accounting, not accrual basis accounting.

B. Transactions are recognized in the period in which the events occur, regardless of cash timing

[V] Correct! Accrual accounting matches revenues when earned and expenses when incurred.

C. Expenses are always recorded immediately upon signing a supply contract

[X] Incorrect. Executory contracts do not trigger expense recognition until goods/services are delivered or consumed.

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