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 adjusting entries for accrued expenses causes a decrease in assets?

Recording accrued utilities by debiting Utilities Expense and crediting Utilities Payable

Recording accrued interest by debiting Interest Expense and crediting Interest Payable

Recording accrued salaries by debiting Salaries Expense and crediting Salaries Payable

Recording expired prepaid insurance by debiting Insurance Expense and crediting Prepaid Insurance

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Verified step by step guidance

Step 1: Understand the concept of adjusting entries for accrued expenses. Adjusting entries are made at the end of an accounting period to record expenses that have been incurred but not yet paid or recorded. These entries ensure that the financial statements reflect the correct financial position and performance.

Step 2: Analyze the impact of each adjusting entry on the accounting equation (Assets = Liabilities + Equity). Specifically, identify whether the entry decreases assets, increases liabilities, or affects equity.

Step 3: For the first three options (Utilities Expense, Interest Expense, and Salaries Expense), note that these entries involve debiting an expense account and crediting a payable account. This increases liabilities but does not directly decrease assets.

Step 4: For the fourth option (Expired Prepaid Insurance), recognize that prepaid insurance is an asset account. When insurance expires, the adjusting entry involves debiting Insurance Expense and crediting Prepaid Insurance. This reduces the Prepaid Insurance asset account, thereby decreasing total assets.

Step 5: Conclude that the correct adjusting entry that causes a decrease in assets is 'Recording expired prepaid insurance by debiting Insurance Expense and crediting Prepaid Insurance.' This entry reflects the consumption of the prepaid insurance asset over time.