Question

3. A physician’s group keeps their financial records under the cash basis of accounting. When does the physician group record the expense for painting their office?

a. when they receive the bill

b. when the painting was done

c. when the bill is paid

d. when management decides that the office needs to be painted

Answer 1

The correct answer is C) when the bill is paid

Explanation

Under the cash basis of accounting, the expense or income is recognized when the paint for same has been made, irrespective of goods or service has been received or provided. In our case, Physician should record the painting expense, when the payment has been made for it as the physician is maintaining its account on cash basis. Therefore the correct answer is C) when the bill is paid.

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