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

Adjusting entries for accrued expenses typically affect which of the following accounts?

An asset account and a liability account

An expense account and a liability account

A revenue account and an asset account

A revenue account and a liability account

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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 or recorded in the accounts. These require an adjusting entry to ensure the financial statements reflect the correct expense and liability.

Identify the accounts involved: Adjusting entries for accrued expenses typically involve an expense account (to recognize the incurred expense) and a liability account (to record the obligation to pay).

Determine the purpose of the adjustment: The goal is to match expenses to the period in which they were incurred, following the accrual basis of accounting. This ensures compliance with the matching principle.

Prepare the adjusting entry: Debit the appropriate expense account to increase the expense and credit the liability account (e.g., Accounts Payable or Accrued Expenses) to reflect the obligation.

Review the impact on financial statements: The adjusting entry increases expenses on the income statement and liabilities on the balance sheet, ensuring accurate reporting of the company's financial position.