Chapter 8, Problem 5RQ

To determine

Accrual basis accounting:

According to this basis of accounting, revenue should be recognized at the time when it is earned, irrespective of whether the cash received or not, and expense should be recognized at the time when it is incurred, irrespective of whether it is paid or not.

To Explain: The reason behind recording interest in the period in which it is incurred rather than the period in which it is paid.