Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Expenses

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Expenses

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Multiple Choice

Which of the following is a typical accrued expense adjustment?

Recording salaries earned by employees but not yet paid at the end of the period

Recognizing prepaid insurance as an expense

Recording unearned revenue as earned

Depreciating equipment over its useful life

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Verified step by step guidance

Understand the concept of accrued expenses: Accrued expenses are expenses that have been incurred but not yet paid by the end of the accounting period. These are recorded as liabilities on the balance sheet and as expenses on the income statement.

Analyze the first option: 'Recording salaries earned by employees but not yet paid at the end of the period.' This is a typical example of an accrued expense because salaries are incurred as employees work, but payment may occur in the next period.

Evaluate the second option: 'Recognizing prepaid insurance as an expense.' This is not an accrued expense adjustment. Prepaid insurance is an asset that is gradually expensed over time as the coverage period elapses.

Evaluate the third option: 'Recording unearned revenue as earned.' This is not related to accrued expenses. Unearned revenue is a liability that is adjusted when the company provides goods or services, converting it into earned revenue.

Evaluate the fourth option: 'Depreciating equipment over its useful life.' This is not an accrued expense adjustment. Depreciation is the systematic allocation of the cost of an asset over its useful life, not an expense that has been incurred but not yet paid.