Accounts Payable Certification Practice Test

What is one of the accounting treatments for period end accruals?

1. Accounting is created at material receipt or delivery to the final destination.

2. Invoice accounting debits the expense account and credits the liability account.

3. For perpetual accruals, the invoice accounting debits the accrual account and credits the liability account.

4. Invoice accounting for inventory items debits receipt inventory and credits the uninvoiced receipts.

The correct answer is: Invoice accounting debits the expense account and credits the liability account.

The accounting treatment for period-end accruals involves recognizing expenses incurred during the period when the goods or services were received, regardless of whether the invoice has been received. This is essential for accurate financial reporting, as it ensures that expenses are matched with the revenues they help to generate, adhering to the accrual basis of accounting. When an invoice is accounted for, it typically involves debiting the expense account to reflect the cost incurred in the period. Simultaneously, crediting the liability account acknowledges that the business now has an obligation to pay that amount. This entry captures the essence of period-end accruals, where the expense is recorded in the appropriate period, ensuring that the financial statements provide a true and fair view of the company's financial position. The other choices focus on different aspects of accounting processes or different situations, which do not align with the specific accrual treatment described.