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 creates a future deductible amount?

Prepaid insurance

Accrued salaries payable

Unearned revenue

Depreciation expense

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Verified step by step guidance

Understand the concept of accrued expenses: Accrued expenses are liabilities that represent expenses incurred but not yet paid. These are recorded as adjusting entries at the end of the accounting period.

Identify the nature of accrued salaries payable: Accrued salaries payable is an adjusting entry that records salaries earned by employees but not yet paid. This creates a liability on the balance sheet and an expense on the income statement.

Recognize how accrued salaries payable creates a future deductible amount: When salaries are paid in the future, the liability is reduced, and the payment is deductible for tax purposes, as it represents an expense incurred in the current period.

Differentiate accrued salaries payable from other options: Prepaid insurance represents an asset, unearned revenue is a liability for revenue received in advance, and depreciation expense is a non-cash expense that reduces the value of an asset over time. None of these create a future deductible amount in the same way accrued salaries payable does.

Conclude that accrued salaries payable is the correct answer because it directly results in a future deductible amount when the liability is settled through payment.