Question

Under accrual accounting, entities recognize interest

expense on debt on the income statement as it is incurred over
time, not necessarily when it is paid in cash.
A. True
B.False

Answer 1

True, under accrual accounting, interest expense on debt is recorded on the income statement as it is incurred, rather than when the cash is paid.

Step-by-step explanation:

Under accrual accounting, the answer to the question is True. Interest expense is recognized on the income statement as it accrues over time, regardless of when the actual cash payment is made. This means that even if the cash payment for interest has not been paid within the accounting period, the expense is still recorded when it is incurred, reflecting the cost of borrowing over the period in which the borrowing is used to generate revenue. This method provides a more accurate reflection of a company's financial position during a specific period.