Question

Under the accrual method of accounting, expenses are recorded:

When they are paid.

When invoices for expense items are received.

When they are incurred

Answer 1

Answer:

Accrual accounting requires revenues and expenses to be recorded in the accounting period that they are incurred. Since accrued expenses are expenses incurred before they are paid, they become a company's liabilities for cash payments in the future. Therefore, accrued expenses are also known as accrued liabilities

Answer 2

Answer:

From the given options, the correct option is When they are incurred.

Under the accrual method of accounting, expenses are recorded when they are incurred.

Explanation:

• Accrual accounting is a method of accounting in which revenue and expenses are recorded when a transaction occurs rather than when payment is received or made.
• Accrual accounting is a type of accounting that credits and debits payments and expenses as they are earned or incurred.
• Accrual accounting is distinct from cash basis accounting in that expenses are recorded when payments are made and revenues are recorded when cash is received.
• Because accrued expenses are expenses incurred before they are paid, they become a company's liability for future cash payments. As a result, accrued expenses are also referred to as accrued liabilities.

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