Advance amount received from customers is not considered as sale. It is based on which concept ?

Correct option is C

The correct answer is (c) Accrual

Explanation:
• Under the accrual concept, revenues and expenses are recorded when they are earned or incurred, not when cash is received or paid.
• An advance received from a customer is not treated as sales because the goods or services are yet to be delivered.
• It is recorded as a liability (unearned income) until the actual sale occurs.
• This ensures that income is recognized in the correct accounting period.

Information Booster:
• The accrual concept forms the basis of modern accounting systems.
• It provides a true and fair view of financial performance.
• This concept follows matching of revenues and expenses principle.
• Advance from customers is shown under Current Liabilities in the balance sheet.
• Cash basis accounting recognizes income only when cash is received.

Additional Knowledge:
• Conservatism Concept: Records expenses and losses as soon as they are probable, but incomes only when realized.
• Consistency Concept: Ensures the same accounting methods are used year after year for comparability.
• Money Measurement Concept: States only those transactions measurable in monetary terms are recorded in books.