Keagan Company, a calendar year taxpayer, incurred $1,490 of long-distance telephone charges in December 2012 and mailed a check to the telephone company on January 4, 2013. If Poole is an accrual basis taxpayer, it reports a $1,490 tax deduction in 2013.

Question

Quizplus · Accepted Answer

An accrual basis taxpayer reports expenses in the year they are incurred, not when they are paid. Therefore, Keagan Company should report the $1,490 deduction in 2012, when the expense was incurred.

Keagan Company, a Calendar Year Taxpayer, Incurred $1,490 of Long-Distance