Which of the following best describes expenses in accrual accounting?

In accrual accounting, expenses are recognized when they are incurred, regardless of when the cash is actually paid. This means that if an expense is related to a period of economic activity, it is recorded in the financial statements for that period, aligning the recognition of expenses with the revenues they help generate. This approach provides a more accurate picture of a company's financial position and performance, as it reflects all economic events rather than just cash transactions.

For example, if a company incurs utility expenses for the month of June but pays the bill in July, under accrual accounting, the expense would still be recorded in June's financial statements. This matching of expenses with revenues is a cornerstone principle of the accrual basis of accounting, which aims to improve the relevance and reliability of financial reporting.