At the end of October,Flagship Marina received a bill for fuel used in October.Payment is not due until November 30.This transaction:
A)Should not be recorded in the accounting records until November.
B)Causes a decrease in assets and in owners' equity in November,when the bill is paid.
C)Should be recorded as an expense of October,regardless of the payment date.
D)Is recorded as a liability in October,but is not considered an expense until paid.

Question

Quizplus · Accepted Answer

The accrual basis of accounting requires that expenses be recognized when they are incurred, not when they are paid. Therefore, the fuel bill should be recorded as an expense of October, regardless of the payment date. Option A is incorrect because the transaction should be recorded in October. Option B is incorrect because the decrease in assets and owners' equity will occur in November when the bill is paid, but the expense should still be recorded in October. Option D is incorrect because the fuel bill should be recorded as an expense in October, not as a liability.

At the End of October,Flagship Marina Received a Bill for Fuel