What is the effect of an accrual in respect of electricity used during the period on the statement of financial position, the income statement and the cash flow statement?
A) No effect on the statement of financial position, charge as an expense to the income statement, no effect on the cash flow statement
B) No effect on the statement of financial position, charge as an expense to the income statement, increase the cash outflows in the cash flow statement
C) Increase the current liabilities in the statement of financial position, charge as an expense to the income statement, no effect on the cash flow statement
D) Increase the current assets and current liabilities in the statement of financial position, no effect on the income statement, no effect on the cash flow statement

Question

Quizplus · Accepted Answer

Accruals for expenses like electricity used increase current liabilities on the statement of financial position because they represent amounts owed but not yet paid. They are also charged as an expense on the income statement, reflecting the cost incurred during the period. However, they do not affect the cash flow statement immediately since the cash has not yet been paid out.

What Is the Effect of an Accrual in Respect of Electricity