• 1 Marks

FA – Nov 2021 – L1 – SA – Q18 – Accruals and prepayments

This question identifies the fundamental accounting concept related to prepaid and accrued expenses.

Adjustments are made for prepaid and accrued expenses in order to comply with which fundamental accounting concept?
A. Matching
B. Prudency
C. Aggregation
D. Materiality
E. Consistency

A

Explanation:
The matching concept requires that expenses be recognized in the same period as the revenues they help generate, necessitating adjustments for prepaid and accrued items.

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