A purchase should usually not be recognized (recorded)before the title is transferred because,until that point,the vendor has not fulfilled its contractual obligation and the buyer has no liability.

Question

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Recognizing a purchase before the title is transferred could result in overstatement of assets and understatement of liabilities, which goes against the accrual basis accounting principle. Additionally, recognizing a purchase before the title is transferred could lead to legal and financial risks for the buyer. Therefore, it is generally recommended that a purchase is recognized only after the title is transferred.

A Purchase Should Usually Not Be Recognized (Recorded)before the Title