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Thursday, March 19, 2015

Brief on "Accrued Expense" For Cambodian and Others

Accrued expenses are expenses that have been incurred, but not yet paid for. To put it another way, an accrued expense is paid after being recorded on the books. Every adjusting entry for accrued expenses debits an expense account, increasing expenses on the income statement and reducing net income, and credits a payable account, increasing liabilities on the balance sheet.

How to Record Accrued Expenses 

• Interest owed but not yet paid on borrowed funds.

Interest Expense
          Interest Payable

• Rent owed, but not yet paid.

Rent Expense
           Rent Payable

• Utility bills owed, but not yet paid:

Utilities Expense
           Utilities Payable

• Salary expense owed, but not yet paid.

Salaries Expense
            Salaries Payable

• Property and other taxes owed, but not yet paid.

Property Tax Expense Property
             Tax Payable

Practice:

Problem I. 

Make the following adjusting journal entries: Accrue interest expense of $500 Accrue WHT tax expense of $300 Accrue audit expense of $100


Solution:

Problem I.  

Interest Expense 500
            Interest Payable 500
 (To accrue interest expense)

WHT Taxes 300
            WHT Taxes Payable 300
  (To accrue WHT tax expense)

Audit Expense 100
            Audit Payable 100
  (To accrue Audit expense)

Source: http://www.aipb.org/pdf/AdjustingEntries.pdf

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