Multiple Choice
In the context of managerial accounting, wages, material costs, and taxes are examples of:
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3. Accrual Accounting Concepts
Adjusting Entries: Accrued Expenses
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Which of the following accounts is typically considered an accrued expense?
A
Unearned Revenue
B
Salaries Payable
C
Accounts Receivable
D
Prepaid Insurance
Verified step by step guidance1
Understand the concept of accrued expenses: Accrued expenses are liabilities that represent costs incurred by a company but not yet paid. These are recorded in the accounting period in which they are incurred, regardless of when payment is made.
Analyze each account option provided: Unearned Revenue represents money received before goods or services are delivered, which is a liability but not an accrued expense. Accounts Receivable represents money owed to the company by customers, which is an asset. Prepaid Insurance represents payments made in advance for insurance coverage, which is an asset.
Focus on Salaries Payable: Salaries Payable is a liability account that represents salaries earned by employees but not yet paid by the company. This fits the definition of an accrued expense because the expense has been incurred but payment is pending.
Relate Salaries Payable to the matching principle: The matching principle in accounting requires that expenses be recognized in the same period as the revenues they help generate. Salaries Payable ensures that employee compensation is recorded in the correct period, even if payment occurs later.
Conclude that Salaries Payable is the correct answer: Based on the analysis and definitions, Salaries Payable is typically considered an accrued expense because it represents an obligation to pay for services already received.
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