[amp_mcq option1=”Money measurement concept” option2=”Cost concept” option3=”Realisation concept” option4=”Separate entity concept” correct=”option3″]<\/p>\n
The correct answer is C. Realisation concept.<\/p>\n
The realisation concept states that revenue should be recognised when it is realised or realisable, and earned. This means that revenue should not be recognised until it is certain that the company will receive the cash or other economic benefits from the transaction.<\/p>\n
In the case of a firm that considers advance received from its clients as its income, the firm is recognising revenue before it is realised or realisable. This is because the firm has not yet earned the revenue, as it has not yet delivered the goods or services to the client.<\/p>\n
The other concepts are not violated in this case. The money measurement concept states that only transactions that can be measured in monetary terms should be recorded in the financial statements. The cost concept states that assets should be recorded at their historical cost. The separate entity concept states that the financial statements of a company should reflect the financial position and performance of the company as a separate entity, and not the financial position and performance of its owners.<\/p>\n","protected":false},"excerpt":{"rendered":"
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