How are expenses recorded simultaneously on the balance sheet and income statement?

The correct answer highlights a critical aspect of accrual accounting, which is the system used in most healthcare organizations. In this system, expenses are recognized when they are incurred, not necessarily when cash changes hands.

When an expense is incurred, such as a service or product being received, it is recorded as a liability on the balance sheet, typically under accounts payable. This reflects the amount that the healthcare organization owes for the services or goods received but has not yet paid for. Simultaneously, this expense is also recorded on the income statement, impacting the net income for the period. This dual recording ensures that the financial statements accurately represent the financial position and performance of the organization for that reporting period.

Other options do not align with the principles of accruing expenses. For instance, recording an expense when cash is received does not capture when the expense actually occurred. Similarly, recognizing expenses when services are provided without prior notice or at the end of the financial year does not follow the systematic and consistent recognition required in accounting practices. Understanding the timing of expense recognition is essential for evaluating financial health and ensuring compliance with accounting standards.