Sparkling Pools received a bill for $1,200 for running newspaper ads during the last two weeks of July;the bill will be paid on August 1.Advertising Expense should be:
A)credited for $1,200 in July.
B)credited for $1,200 in August.
C)debited for $1,200 in July.
D)debited for $1,200 in August.

Question

Quizplus · Accepted Answer

The expense recognition principle states that expenses should be recorded in the same period as the revenues they generate,not necessarily the period in which cash is paid for them.During July,a journal entry should be prepared with a debit to Advertising Expense (since the ads ran during July)and a credit to Accounts Payable (since the bill is unpaid)for $1,200.

Sparkling Pools Received a Bill for $1,200 for Running Newspaper