To record the purchase of assets on account under the modified cash accounting method,
A) no entry is required.
B) debit the asset and credit Accounts Payable.
C) debit the asset and credit Cash.
D) debit Accounts Receivable and credit Accounts Payable.

Question

Quizplus · Accepted Answer

Under the modified cash accounting method, transactions are recorded when cash is paid or received, or when a liability is incurred or settled. Purchases of assets on account constitute incurring a liability, so an entry is required. The transaction would be recorded by debiting the asset account (e.g. Equipment) and crediting the Accounts Payable account.

To Record the Purchase of Assets on Account Under the Modified