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 an example of an accrued expense adjusting entry?

Recording depreciation expense for the period

Prepaying insurance for the next six months

Recording salaries earned by employees that have not yet been paid at the end of the period

Recognizing unearned revenue that has now been earned

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Verified step by step guidance

Understand the concept of accrued expenses: Accrued expenses are costs that have been incurred during a period but have not yet been paid or recorded in the accounts. These require an adjusting entry at the end of the period to reflect the expense and the liability.

Analyze the options provided: Depreciation expense is not an accrued expense; it is a non-cash expense related to the allocation of asset cost over time. Prepaying insurance is a prepaid expense, not an accrued expense. Recognizing unearned revenue is related to revenue adjustments, not expenses.

Focus on the correct example: Recording salaries earned by employees that have not yet been paid at the end of the period is an accrued expense. This is because the company owes the employees for work performed, creating a liability that must be recorded.

Determine the adjusting entry: To record accrued salaries, you would debit the Salaries Expense account to recognize the cost incurred and credit the Salaries Payable account to record the liability.

Ensure proper financial statement impact: The adjusting entry ensures that the expense is reflected in the Income Statement for the period and the liability is shown on the Balance Sheet, maintaining accurate financial reporting.