Final answer:
Accrual accounting requires recording the cost associated with the failure of credit customers to pay their bills as an expense in the period when it is probable that the payment will not be received.
Step-by-step explanation:
In accrual accounting, the cost associated with the failure of credit customers to pay their bills should be recorded as an expense in the period when it is probable that the payment will not be received, and the amount can be reasonably estimated. This is known as the allowance for doubtful accounts. It is necessary to recognize this expense to match it with the revenue generated from the credit sales.
For example, if a company estimates that 5% of its credit sales will not be paid, and it has $100,000 in credit sales for the period, it would record an expense of $5,000 ($100,000 x 5%) in the same period.
It's important to note that the actual bad debts may differ from the estimated amount, and adjustments may need to be made in subsequent periods.