The business incurred an expense and planned to pay for the expense later on credit. To record this:
A) an expense is debited and a liability is credited.
B) an expense is debited and an asset is credited.
C) an asset is debited and asset is credited.
D) None of the above answers are correct.

Question

Quizplus · Accepted Answer

When a business incurs an expense and plans to pay for it later, it increases its expenses (debit) and increases its liabilities (credit) to reflect the obligation to pay in the future. This is the basic principle of accrual accounting.

The Business Incurred an Expense and Planned to Pay for the Expense