In Relation to the Recognition and Realisation of Income, Which

question 16

Multiple Choice

In relation to the recognition and realisation of income, which statement is correct?

• A)Recognition of income means including it in the income statement as part of the profit calculation.
• B)Income from a credit sale is normally recognised in the statement of financial performance when the cash is received.
• C)The realisation convention has replaced the income recognition criteria contained in the Conceptual Framework.
• D)All of the statements are correct.

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Definitions:

Principal Portion

The part of a payment that reduces the original amount of the loan, as distinguished from the interest portion.

Current Liabilities

Financial responsibilities that must be settled within a year or during the standard operational cycle.

Statement of Financial Position

Another term for the balance sheet, detailing a company's assets, liabilities, and shareholders' equity at a specific point in time.

Liquidity

A measure of how easily assets can be converted into cash without affecting their market price.