Under cash-basis accounting, an electricity expense is generally recorded when:
Correct answer: C. The bill is paid
- A. The electricity is consumed
- B. The bill is received
- C. The bill is paid
- D. The financial year ends
Explanation
Cash-basis accounting records expenses when cash is actually paid. Accrual accounting would normally recognise the electricity cost when the consumption or obligation occurs, even if payment is later.
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Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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