Practice question · True or false
Under the accrual principle, an expense is recorded when the cash is actually paid.
Hints
- Accrual or cash basis?
- Incurred, not paid.
Show the answer
False
Why
False. Accrual records an expense when it is incurred, when the obligation arises, regardless of when cash moves. That is what makes profit differ from cash flow, and why a profitable company can still fail: the matching principle puts the expense in the period whose revenue it helped produce.
Practise Recording Transactions
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