What must be done for liabilities incurred on the last day of the month of a quarter?

Liabilities incurred on the last day of the month of a quarter need to be treated as separate and distinct from liabilities of the following quarter to ensure accurate financial reporting and proper matching of expenses to the period they were incurred. This treatment is essential for compliance with accounting principles such as the matching principle, which states that expenses should be recorded in the same period as the revenues they help to generate.

By keeping these liabilities distinct, it ensures clarity in the businesses' financial statements, aiding stakeholders in assessing the company's financial health and performance accurately. This also allows for appropriate planning and forecasting in the subsequent quarter, as those specific liabilities will need to be accounted for separately.

Combining liabilities from different quarters or ignoring them until the next quarter could lead to inaccuracies in financial reporting and potential complications during audits or tax preparations. Similarly, automatically accepting them as annual liabilities would distort the actual financial performance for the reporting periods. Thus, recognizing liabilities incurred at the end of a quarter as separate entities allows for better financial management and transparency.