Question

What is the unique characteristic of an accrual adjustment?

1) It is recorded at the end of the accounting period
2) It is recorded when cash is received or paid
3) It is recorded when an expense is incurred or revenue is earned
4) It is recorded when an asset is acquired or a liability is incurred

Answer 1

An accrual adjustment is recorded when an expense is incurred or revenue is earned, regardless of cash transactions.

Step-by-step explanation:

The unique characteristic of an accrual adjustment is that it is recorded when an expense is incurred or revenue is earned.An accrual adjustment is used to recognize revenue or expenses that have been incurred but not yet recorded in the accounting books. It helps to match revenues and expenses to the period in which they are earned or incurred, rather than when cash is received or paid.For example, if a company provides a service to a customer in December but does not receive payment until January, the revenue for that service will be recorded in December through an accrual adjustment even though cash is not received.