A company's first event in the year commencing 1 July 2016 was to pay $250 cash for stationery purchased in June 2016;this was recognised as an expense in that month.Which of the following changes took place as a consequence of this event?
A) Assets increased by $250.
B) Liabilities decreased by $250.
C) Expenses increased by $250.
D) None of the above changes occurred.

Question

Quizplus · Accepted Answer

Paying $250 cash for stationery purchased in June 2016 would decrease liabilities because it settles an obligation that was previously recognized, without increasing expenses in the new fiscal year since the expense was already recognized in June 2016.

A Company's First Event in the Year Commencing 1 July