If accounts payable have increased during a period,

Question

BlackTom AI · Accepted Answer

When accounts payable rise over a period, it means you have recognized more expenses on an accrual basis than you have actually paid in cash during that same period. 
Option 1: 'expenses on an accrual basis are greater than expenses on a cash basis.' This aligns with accrual accounting principles, which record expenses when incurred, not when paid, so increasing payables indicate higher accrual expenses relative to cash outlays.
Option 2: 'expenses on an accrual basis are the same as expenses on a cash basis.' This would only be true if cash payments perfectly matched incurred expenses, which is not the case when payables increase, so this is incorrect.
Option 3: 'revenues on an accrual basis are less than revenues on a cash basis.' Revenues are not the focus of the effect caused by rising payables; this statement misattributes the impact to revenues instead of expenses, making it inaccurate in this context.
Option 4: 'expenses on an accrual basis are less than expenses on a cash basis.' This contradicts the fundamental implication of increasing payables, which signals higher accrual expense relative to cash paid, so it is false.

If accounts payable have increased during a period,

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