Question

Alan, a sports shop owner bought cricket bats in May for which he needs to pay in June. When should Alan record this transaction under accrual basis of accounting?

• A. May
• B. June
• C. Either a or b
• D. It's not a transaction

Answer 1

The correct option is A

May

Alan should record this transaction in May since the transaction of buying cricket bats was in May, even though the payment has to be made later (in June).
This is covered by the Accrual basis of accounting which accumulates the expenses or revenues in the period in which they occur in spite of money not paid or received.