On July 25,Henry Company's accountant prepared a check to prepay for the August through December monthly rent payments.Henry Company mailed the check on July 27 to the landlord.The landlord received the check on July 31 and cashed it on August 2.When should Henry Company record the rent expense for August associated with this transaction? Henry Company uses accrual accounting.

Question

Quizplus · Accepted Answer

Under accrual accounting, expenses are recognized when they are incurred, not necessarily when cash is paid. Since the rent expense is for August, it should be recorded in August, regardless of when the check was prepared, mailed, or cashed.

On July 25,Henry Company's Accountant Prepared a Check to Prepay