Accrual accounting recognises expenses when they have been incurred (economic benefits used up) regardless of whether the cash has or hasn't been paid. This means that expenses are recorded when they are owed, rather than when they are paid, which gives a more accurate picture of a company's financial position.

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Accrual Accounting

Question 51

Multiple Choice

Accrual accounting:

A) recognises expenses when they are possible.
B) recognises expenses when they are earned.
C) recognises expenses when the cash has been paid.
D) recognises expenses when they have been incurred (economic benefits used up) regardless of whether the cash has or hasn't been paid.

Correct Answer: