Prime Purchase received a phone bill that amounts to $500 (related to calls made during 2021). Prime Purchase will pay the bill in January 2022. Cash basis : No change Accrual basis : Decrease $500 I understand that liability in "accounts payable" will increase by 500 , do we add a (500) in income statement column to compensate this? thought that since the bill is not due in 2021 we dont add the $500 expense in income statement in 2021. How else do we balance this increase in liability
Prime Purchase received a phone bill that amounts to $500 (related to calls made during 2021). Prime Purchase will pay the bill in January 2022. Cash basis : No change Accrual basis : Decrease $500 I understand that liability in "accounts payable" will increase by 500 , do we add a (500) in income statement column to compensate this? thought that since the bill is not due in 2021 we dont add the $500 expense in income statement in 2021. How else do we balance this increase in liability
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prime Purchase received a phone bill that amounts to $500 (related to calls made during 2021). Prime Purchase will pay the bill in January 2022.
Cash basis : No change
Accrual basis : Decrease $500
I understand that liability in "accounts payable" will increase by 500 , do we add a (500) in income statement column to compensate this? thought that since the bill is not due in 2021 we dont add the $500 expense in income statement in 2021. How else do we balance this increase in liability?
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