The correct answer is: D. a-3, b-4, c-2, d-1
a. Measurement of income: Accrues to the equity of owners. This means that income is recognized when it is earned, regardless of when it is received.
b. Recognition of expense: Matching revenue with expenses. This means that expenses are recognized in the same period as the revenue they generate.
c. Basis of realization: Accounting period. This means that income and expenses are recognized in the period in which they occur, regardless of when they are received or paid.
d. Identification of revenue: When a performance obligation is satisfied. This means that revenue is recognized when the seller has transferred control of the promised goods or services to the buyer.
Here is a more detailed explanation of each option:
- a. Measurement of income: Accrues to the equity of owners. This means that income is recognized when it is earned, regardless of when it is received. For example, if a company sells goods on credit, it will recognize the revenue from the sale when the goods are shipped, even if the customer does not pay for them until later.
- b. Recognition of expense: Matching revenue with expenses. This means that expenses are recognized in the same period as the revenue they generate. For example, if a company incurs costs to produce goods that are sold on credit, it will recognize the expense of those costs in the same period as the revenue from the sale.
- c. Basis of realization: Accounting period. This means that income and expenses are recognized in the period in which they occur, regardless of when they are received or paid. For example, if a company incurs costs to produce goods that are sold in the following period, it will recognize the expense of those costs in the current period.
- d. Identification of revenue: When a performance obligation is satisfied. This means that revenue is recognized when the seller has transferred control of the promised goods or services to the buyer. For example, if a company sells goods on credit, it will recognize the revenue from the sale when the goods are shipped to the buyer.