Using accrual accounting, expenses are recorded and reported only a. when they are incurred, whether or not cash is paid b. if they are paid before they are incurred c. if they are paid after they are incurred d. when they are incurred and paid at the same time

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26 August, 13:50

Using accrual accounting, expenses are recorded and reported only a. when they are incurred, whether or not cash is paid b. if they are paid before they are incurred c. if they are paid after they are incurred d. when they are incurred and paid at the same time

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Coleman · Answer 1

The correct option is A, expenses are recorded when they are incurred re whether or not cash is paid.

Explanation:

Accrual accounting mostly found in the private sectors, is of the view that revenue should be recognized when earned and expenses be recorded when incurred.

Earning revenue in this sense means the seller has discharged his obligation of delivering goods or services to the buyer.

However, incurring expenses means that the business has received the benefits derivable from the goods or services.

As far as accrual accounting is concerned enjoying the benefits from goods or services is different from cash settlement. The cash settlement is looked at in the cash flow statement.

The subfunction of finance in charge of cash receipt and settlement in an organization is known as treasury