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JAMB Principles of Accounts 1995 Question 2

Question 2

Accounting Concepts and Conventions

Which of the following concepts stipulates that accounting profit is the difference between revenue and expenses?

  1. A.Accrual concept
  2. B.Conservatism concept
  3. C.Prudence concept
  4. D.Materiality concept.
Show the answer and explanation

Answer: A (Accrual concept)

Explanation

The accrual concept says profit is revenue earned less expenses incurred in the period, not simply cash received less cash paid.