Accrual for telephone expenses up to year-end

Steps:

• Determine year-end date: 31 October, so accrue expenses incurred by then.
• Identify invoice period: 1 September to 30 November (3 months total).
• Calculate usage to year-end: 1 September to 31 October (2 months).
• Compute accrual: (2/3) of total invoice ($1041 calls +$156 rental = $1197) =$798.

Why B is correct:

• B accrues $798, matching the matching principle in accrual accounting, which requires recognizing expenses for the period they relate to, regardless of payment timing.

Why the others are wrong:

• A: No accrual ignores expenses incurred from September to October, violating accrual basis.
• C: Full $1197 includes November usage post-year-end, overstating liabilities.
• D: $399 (1/3) underaccrues by limiting to one month, missing September-October costs.

Final answer: B