An accountant of a firm,maintaining his books under accrual basis,does not want to account salaries amounting to Rs20000 for the - Accountancy - Theory Base of Accounting

Question

An accountant of a firm,maintaining his books under accrual
basis,does not want to account salaries amounting to Rs20000 for
the month of March 2016,on the grounds,that it was not paid The
firm closes its books on 31st March every year Is the accountant
correct in doing so?

Rashi Lokwani · Accepted Answer

Dear Student,

According to the matching principle, a company should use the
accrual basis of accounting and hence, the expenses should be
recorded in the period in which they have been incurred and not in
the period in which they have been paid
Hence, the accountant is wrong in his approach, as the salaries for
employees should be recorded in the books in the period in which
the employees have worked, even if they have not been paid

Regards

An accountant of a firm,maintaining his books under accrual basis,does not want to account salaries amounting to Rs20000 for the month of March 2016,on the grounds,that it was not paid.The firm closes its books on 31st March every year.Is the accountant correct in doing so?