Final answer:
An increase in accounts payable means that accrual basis expenses are greater than cash basis expenses because the expenses are recognized when incurred, not when paid. The correct answer id option (d).
Step-by-step explanation:
When there is an increase in accounts payable during a period, it indicates that the company has incurred expenses for which it has not yet paid cash. In accrual basis accounting, expenses are recognized when they are incurred, regardless of when the cash payment is made.
Therefore, increasing accounts payable without an accompanying cash payment would mean that expenses on the accrual basis are reported when the obligation arises. On the other hand, in cash basis accounting, expenses are recognized only when the cash is actually paid out.
So, when accounts payable increase, it means the company has received goods or services but has delayed payment until a later date. This results in the recognition of expenses on the accrual basis that would not be recorded on the cash basis until the payment is made. Hence, the correct answer to the question is that expenses on an accrual basis are greater than expenses on a cash basis (D) due to the timing difference in recognizing expenses.