Q16RQ - Horngren'S Financial And Managerial Accounting

Question

What is an accrued expense? Provide an example.

Step-by-Step Solution

Answer

Accrued expense is the expense that is incurred but remains unpaid as of date. Example: Unpaid wages of the employees.

Step-by-Step Solution Step 1: Explanation of Expense

Expense refers to the cost of availing of the services or goods. It is incurred in normal business operations. 

Step 2: Treatment of Accrued Expense

Accrued expenses are shown in the income statement and are also reported as a current liability on the balance sheet.