Expenses/Income are recorded when it is earned irrespective of cash being received/paid as per _____________.

Cash basis

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Accrual basis

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Both of the above

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None of the above

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Solution

The correct option is B Accrual basis
Under accrual basis of accounting, expenses are matched with the related revenues and/ or are reported when the expense occurs, not when the cash is paid. The result of accrual accounting is an income statement that better measures the profitability of a company during a specific time period.

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