If the accounting period were the year ending 31 December, which of the following costs would not be reported as an expense for the year ending 31 December this year?
A) Wages paid on 1 January next year for the previous fortnight
B) Goods for resale bought and not sold on 31 December this year
C) Electricity bill paid on 2 January next year for the previous quarter
D) Creditor paid on 3 January next year for advertising in December this year

Question

Quizplus · Accepted Answer

Goods for resale bought and not sold by the end of the accounting period (31 December this year) are reported as inventory on the balance sheet, not as an expense in the income statement. Expenses are recognized when incurred, not necessarily when paid. Wages, electricity bills, and advertising costs for services received within the accounting period are recognized as expenses, regardless of the payment date.

If the Accounting Period Were the Year Ending 31 December