What will QuickBooks Online do in a cash-basis Profit and Loss report when an expense transaction is posted to accounts payable without a bill?

When an expense transaction is posted to accounts payable without a bill in QuickBooks Online, the system records this transaction by debiting the appropriate expense account while simultaneously crediting the accounts payable account. This process reflects the fact that the business has incurred an expense that it has not yet paid for, thus increasing its liabilities.

The cash-basis Profit and Loss report specifically focuses on actual cash transactions, meaning it recognizes income and expenses only when cash changes hands. However, regardless of the method used for reporting, the entry to accounts payable remains important as it shows the obligations of the business. By debiting the expense account, QuickBooks Online accurately reflects the increase in expenses, while crediting accounts payable acknowledges the liability incurred.

The rationale behind this accounting entry is to ensure that the financial statements appropriately reflect the organization’s financial position, which includes both incurred expenses and the obligations to pay them in the future. Therefore, the correct answer accurately identifies the action taken by QuickBooks Online in this scenario in relation to accounts payable.