A company using the accrual basis of accounting pays $15,000 for a television advertising campaign. Commercials will run evenly in December, January, and February. How much expense will be reported on an income statement prepared for the month of December?

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, expenses are recognized when they are incurred, regardless of when the payment is made. Since the advertising campaign will be spread over three months, only one-third of the expense ($15,000 ÷ 3 = $5,000) will be recognized in December.

A Company Using the Accrual Basis of Accounting Pays $15,000