Under which principle are revenues recognized when goods are delivered and expenses recognized when incurred?

• A. Materiality
• B. Accrual Principle
• C. Consistency
• D. Adequate Disclosure

Answer: (B)

This describes the accrual basis of accounting. Under accrual accounting, revenues are recorded when they are earned—typically when goods are delivered or services are performed—regardless of when cash is received. Expenses are recorded when they are incurred, matching them to the revenues they help generate, even if payment occurs later. This approach provides a more accurate view of profitability for the period and is the standard under GAAP. The other options—materiality, consistency, and adequate disclosure—relate to reporting considerations or methods, not to when revenues and expenses are recognized.