Total sales during the financial year amounted to Rs.25 lakh out of which Rs.5 were received in next financial year when the debtors were realized, however, the firm accounted sales as Rs. 25 lakh in the same financial year. The firm is following ______ system of Accounting.

Mercantile

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Cash

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Hybrid

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Ad-hoc system

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Solution

The correct option is A Mercantile
Accrual accounting is the base of present accounting. It is also known as the mercantile system of accounting wherein the transactions are recognized as and when they take place. Under this method, the revenue is recorded when it is earned, and the expenses are reported when they are incurred.

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