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.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Accounting Principles
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.
Practise Accounting Principles
351 free Accounting Principles MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Accounting questions like this
Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Accounting Principles questions
Which expenditure is most likely to be revenue expenditure?
A shop owner buys a personal house using personal funds. How should this transaction normally appear in the shop's accounting records?
Under the prudence concept, inventory at the reporting date is generally valued at:
A business earns a profit and retains it in the business. What is the immediate effect on the accounting equation?
Which transaction illustrates the dual aspect principle without changing the total assets of a business?
At the end of an accounting period, wages have been earned by employees but remain unpaid. Which adjustment is appropriate?