Multiple Choice
The adjusting entry for amounts a company is obligated to pay an employee in the future affects which of the following accounts?
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3. Accrual Accounting Concepts
Adjusting Entries: Accrued Expenses
Multiple Choice
Which of the following best describes the adjusting entry to record an accrued expense at the end of an accounting period?
A
Debit an expense account and credit a liability account
B
Debit a liability account and credit an expense account
C
Debit a revenue account and credit an asset account
D
Debit an asset account and credit a revenue account
Verified step by step guidance1
Understand the concept of accrued expenses: Accrued expenses are expenses that have been incurred but not yet paid or recorded at the end of an accounting period. These require an adjusting entry to ensure the financial statements reflect the expense and the related liability.
Identify the accounts involved: When recording an accrued expense, you need to increase (debit) the expense account to recognize the cost incurred and increase (credit) the liability account to reflect the obligation to pay.
Determine the correct journal entry: The adjusting entry for an accrued expense involves debiting the appropriate expense account (e.g., Salaries Expense, Interest Expense) and crediting the corresponding liability account (e.g., Salaries Payable, Interest Payable).
Eliminate incorrect options: Review the provided options and eliminate those that do not align with the concept of accrued expenses. For example, debiting a liability account and crediting an expense account would decrease the liability and expense, which is incorrect for accrued expenses.
Select the correct answer: Based on the analysis, the correct description of the adjusting entry for an accrued expense is 'Debit an expense account and credit a liability account.'
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