What is the effect of recording an accrued expense on the financial statements?

What is the effect of recording an accrued expense on the financial statements?

Step 1: Understand what an accrued expense is. It is an expense that has been incurred but not yet paid.
Step 2: Recognize that when you record an accrued expense, you are acknowledging that you owe money for a service or product received.
Step 3: Realize that recording this expense increases your liabilities because you now have an obligation to pay.
Step 4: Note that expenses reduce your net income, which in turn decreases your equity on the financial statements.
Step 5: Conclude that the overall effect of recording an accrued expense is an increase in liabilities and a decrease in equity.

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