Accounts payable and receivable on income statement query
I have received wonderful assitance from Pready today, however I just have 2 more clarification requests for income statement items.
I understand that accounts payable and receivable appear on the balance sheet, as previously discussed, however I am stiill confused about their appearance on the income statement.
From my textbook, it indicates that financial reports utilise accrual accounting, not cash accounting. As such, it is not necessary for cash to actually have been paid for the item to be an expense. Expenses are recognised when incurred. So, if accounts payable are things that you are going to pay for in the future (but have already received the goods/services in the reporting period) have you not incurred the expense but not yet paid for it (acrrued expenses) and thus it appears on the income statement as an expense? The text indicates that all expenses incurred in the reported time are recognised in the income statement & expenses incurred but unpaid at reporting date are included as an expense, with the balance sheet recognising a liability.
My question about accounts receivable would probably sound a lot like the rambling above, but I sure you get my drift for both accounts. Although, I understand that income received for as-yet-unrendered servcies is not recognised in the period, even if cash is received.
The more I read the more I confuse myself but the text seems a little clearer (although I may be misinterpreting it) and thus I would like to ask for some more clarification on both accounts. In my issue, both accounts are large & will significantly affect the outcome if I get it wrong!
Sorry to bother you again with this,
Peggy