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24 November, 00:28

Porite Company recognizes revenue in the period in which it records an asset for the related account receivable, rather than in the period in which the account receivable is collected in cash. Porite's practice is an example of:

a) Cash basis accounting

b) Accrual accounting

c) The matching principle

d) Economic entity

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Answers (1)
  1. 24 November, 03:10
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    Answer: Accrual accounting

    Explanation: Under the accrual method of accounting, the entity records the revenues and expenses in the period of their occurrence, regardless when the cash is exchanged.

    In the given case, Porite is recognizing revenues in the same period for the account receivable of asset from which that revenue is generated. Hence, the receiving of revenue is not taken into consideration.

    Hence, from the above we can conclude that the practice of Porite is an example of accrual accounting.
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