'Kwik Kut Hairdressing' rents a small shop located in Melbourne CBD to operate its hairdressing business. In accordance with the Conceptual Framework, 'Kwik Kut Hairdressing' should recognise monthly payment for the shop rental as:

Question

Quizplus · Accepted Answer

According to the Conceptual Framework, expenses are defined as decreases in economic benefits during the accounting period in the form of outflows or consumption of assets. Since 'Kwik Kut Hairdressing' is paying for the shop rental, it is incurring an expense, which is a decrease in assets (cash is decreasing) and an increase in expenses, as it helps generate revenue for the hairdressing business. Therefore, the correct option is D (a decrease in assets and an increase in expense).

'Kwik Kut Hairdressing' Rents a Small Shop Located in Melbourne