Question

What is mercantile basis of accounting ?

• A. Cash basis
• B. Accrual basis
• C. Both of the above
• D. None of the above

Answer 1

The correct option is B Accrual basis

Mercantile basis of accounting is also called as accrual basis of accounting.

Accrual basis of accounting means that the incomes and expenses of an accounting period are recognized at the time when they are incurred or earned irrespective of the fact whether received or not received and paid or not paid.

It helps in depicting the true picture of financial information by recognizing all the economic events regardless of cash received/paid or not.