The question tests understanding of when revenue and expenses are recognized in the accounting method. Accrual accounting records revenue when it is earned and expenses when they are incurred, regardless of when cash actually changes hands. This follows the revenue recognition principle and the matching principle, providing a more accurate picture of a period’s performance and financial position. Why this is the best fit: If a service is performed in one period but the customer pays later, accrual recognizes the revenue in the period of service. Similarly, if an item is used or an obligation is incurred to earn revenue, the expense is recorded in that same period, even if payment occurs later. This timing aligns income with the activities that generate it and aligns expenses with the related revenues, giving a truer view of profitability. In contrast, cash basis would wait to record revenue until cash is received and expenses until cash is paid, which can distort timing and profitability. A modified cash basis or hybrid method mixes approaches for specific items, but the defining feature of the described approach is accrual recognition of revenue earned and expenses incurred.

A billable expense is an expense you incur on behalf of a customer that you intend to charge back to that customer. When you record the expense, you mark it as billable and assign it to the specific customer or job. Later, while creating or updating the customer's invoice, you can add those billable expenses to the invoice so the customer is billed for the actual costs you paid. For example, if you buy supplies for a client’s project, you can record that purchase as a billable expense and link it to that client. When you generate the invoice for the client, you’ll be able to include that expense on the invoice, so the client pays you back for the cost. Other options don’t fit because they’re not charges billed to a customer. A payment to a vendor recorded as an expense is just an expense item for your own records. A purchase order is a request to purchase goods, not an expense you bill the client. A supplier credit is a credit from the vendor, not an expense you bill to a customer.

A credit memo is a record of a customer credit that reduces what they owe or is returned as cash. To issue one, you start by creating the credit memo from the +New menu. Once it's created, you can either apply it to the relevant invoice to decrease the amount due, or issue a refund if cash back is appropriate. This approach keeps the customer’s balance and your books accurate. Creating a credit memo without applying it leaves the credit unallocated, and issuing a refund without first documenting the credit misses the proper tracking in your records.

To add a user, go to the Settings menu (the gear icon) and choose Manage Users. This area is specifically designed for handling who has access to the company file, including adding new users, inviting them by email, and assigning their roles and permissions. That focus on user access in one place is why this path is the correct choice. The other options don’t fit because they either imply only viewing users, point to a different tools area, or refer to navigation typical of a desktop version rather than QuickBooks Online. Here you directly manage and add users, which is what you need.