Which of the Following Is Not Required for an Accrual

question 16

Multiple Choice

Which of the following is not required for an accrual method taxpayer to currently deduct the cost of services received?

• A)The liability must be paid.
• B)The existence of a liability must be established.
• C)The amount of the liability is determined with reasonable accuracy.
• D)The services must actually be provided.

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Definitions:

Effective Annual Rate

The interest rate on an investment or loan that is compounded annually, indicating the actual annual return taking into effect compounding over the year.

Real Return

The yield on an investment once inflation adjustments have been made.

Nominal Return

The amount of profit or loss on an investment before adjusting for factors like inflation, representing the raw financial outcome.

Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, eroding purchasing power.