Question

Which of the following is an example of an accrual-based expense for a pizza restaurant?

a. The cash purchase of a delivery truck

b. The cash purchase of pizza ingredients to be used in the next accounting period

c. The cash and account purchases of pizza ingredients that have been used to make pizzas during the current accounting fiscal period

d. The recognition of a note payable to borrow cash for ongoing operations

Answer 1

Correct answer:

Option (d) or the recognition of a note payable to borrow cash for ongoing operations is correct answer because an accrual-based expense is an expense incurred in current accounting period and payable in next accounting period. So any payable expenses is an accrual-based expense.

Incorrect answers:

Option (a) or The cash purchase of a delivery truck is incorrect answer because the cash purchase of a delivery truck is incurred and payment is also done in current year. An accrual-based expense is an expenses incurred in one accounting period and payable in next accounting period.

Option (b) or The cash purchase of pizza ingredients to be used in the next accounting period is incorrect answer because here the payment is done at time of purchase, But an accrual-based expense is an expenses incurred in one accounting period and payable in next accounting period.

Option(c) or The cash and account purchases of pizza ingredients that have been used to make pizzas during the current accounting fiscal period is incorrect answer because only the account purchases is accrual-based expense and not the cash purchases.

So correct answer (d)