People often have different expenses. Expenses are recorded when cash is paid for services rendered.
When is expense is paid in cash?
- This is known as Cash payment. An expense is said to be recorded only at the same time it was been paid for using cash.
This will make the cash (asset) account to reduce, and the amount of the expense also limits the retained earnings account. Due to the above, there is an offsetting reduction in the part of asset and equity of the balance sheet.
Note that under the accrual basis, revenues and expenses are said to be recorded after transactions takes place.
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