An Expense Incurred in 2008 Is Not Paid Until 2009

question 107

Multiple Choice

An expense incurred in 2008 is not paid until 2009. Using the accrual basis of accounting, the expense should appear on:

• A)neither the 2008 nor the 2009 income statement.
• B)the 2009 income statement.
• C)the 2008 income statement.
• D)both the 2008 and 2009 income statements.

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Definitions:

Zero Profits

Zero profits, or normal profit, occur when a company's total revenues exactly match total costs, leaving no net profit or loss.

Net Present Value

A financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time.

Interest Rate

The proportion of a loan charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Break Even

Break even refers to the point at which total revenues equal total costs, meaning that a business or project is neither losing nor making money.