This transaction will decrease net income under the cash basis,but will not affect net income under the accrual basis.
A)purchase of inventory on account
B)expiration of prepaid rent
C)recording depreciation expense for the year
D)payment of two months rent in advance

Question

Quizplus · Accepted Answer

Under the cash basis, the payment of rent in advance is considered an expense in the period it is paid. Therefore, it will decrease net income. However, under the accrual basis, the rent expense would be recognized when the period for which it applies actually occurs, and so it would not be affected by the advance payment. The other options would affect net income under both the cash and accrual basis.

This Transaction Will Decrease Net Income Under the Cash Basis,but