Under Modified Accrual Accounting, When Should an Expenditure Be Recorded

question 31

Multiple Choice

Under modified accrual accounting, when should an expenditure be recorded to recognize interest on long-term debt?

• A) at the end of each accounting period.
• B) when payment is due within one fiscal year.
• C) when payment is due.
• D) when cash is available to pay the interest.
• E) when the interest is incurred.

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Definitions:

Investing Activities

Financial transactions involving the purchase and sale of long-term assets and other investments not included in cash equivalents.

Cash Flow Statement

A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Statement of Cash Flows

This document details the combined amount of cash a business gains from its day-to-day operations and outside investments, and the cash it expends on operating and investing activities over a particular period.

Indirect Method

A method of calculating cash flows from operating activities in the cash flow statement by adjusting net income for changes in non-cash accounts.