Question

Which of the following is an example of an accrual error?

a) Failure to record depreciation expense
b) Recording a sale before the goods are delivered
c) Incorrectly classifying an expense as a capital expenditure
d) Forgetting to record a cash payment

Answer 1

An example of an accrual error is recording a sale before the goods are delivered, which affects the correct period of revenue recognition. It is not related to depreciation, capital expenditure classification, or recording of cash payments.

Step-by-step explanation:

Accrual errors involve recognizing revenue or expenses in incorrect accounting periods. An example of an accrual error is b) Recording a sale before the goods are delivered. This is because revenue recognition should occur when the performance obligation is satisfied, which is typically when goods are transferred or services are performed for the customer, not necessarily when the sale is recorded or payment is received.

Failure to record depreciation expense is not an accrual error but rather an omission error. Incorrectly classifying an expense as a capital expenditure is a classification error. Forgetting to record a cash payment is also not an accrual error but an omission that affects the cash basis of accounting.