A transaction should be recorded when title to merchandise passes from the supplier to the purchaser and creates an obligation to pay.

Question

Quizplus · Accepted Answer

This is the basic principle of accrual accounting, where revenue and expenses are recognized when they are earned or incurred, not when money is received or paid. Recording a transaction when title to merchandise passes from the supplier to the purchaser and creates an obligation to pay is consistent with this principle.

A Transaction Should Be Recorded When Title to Merchandise Passes