Multiple Choice
At which step of the accounting cycle are balances analyzed and adjusting entries, such as those for accrued expenses, recorded?
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3. Accrual Accounting Concepts
Adjusting Entries: Accrued Expenses
Multiple Choice
Which of the following best describes the accounts affected by an adjusting entry for accrued expenses?
A
A debit to an expense account and a credit to a liability account
B
A debit to a revenue account and a credit to an asset account
C
A debit to a liability account and a credit to an expense account
D
A debit to an asset account and a credit to 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 in the accounts. These require an adjusting entry at the end of the accounting period to ensure the financial statements reflect the correct expense and liability amounts.
Identify the accounts involved: When recording accrued expenses, the expense account is increased (debited) to recognize the incurred expense, and the liability account is increased (credited) to reflect the obligation to pay in the future.
Analyze the options provided: The correct adjusting entry for accrued expenses involves a debit to an expense account (to record the expense) and a credit to a liability account (to record the obligation).
Eliminate incorrect options: Review each option and eliminate those that do not match the correct treatment of accrued expenses. For example, debiting a revenue account or crediting an asset account would not be appropriate for accrued expenses.
Select the correct answer: Based on the analysis, the correct description of the accounts affected by an adjusting entry for accrued expenses is 'A debit to an expense account and a credit to a liability account.'
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