What is the effect of recording an adjusting entry for accrued expenses on the trial balance?
Practice Questions
1 question
Q1
What is the effect of recording an adjusting entry for accrued expenses on the trial balance?
Increase total debits and total credits
Decrease total debits and total credits
Increase total debits and decrease total credits
Decrease total debits and increase total credits
Recording an adjusting entry for accrued expenses increases total debits (expenses) and total credits (liabilities), keeping the trial balance in balance.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the effect of recording an adjusting entry for accrued expenses on the trial balance?
Solution: Recording an adjusting entry for accrued expenses increases total debits (expenses) and total credits (liabilities), keeping the trial balance in balance.
Steps: 7
Step 1: Understand what accrued expenses are. These are expenses that have been incurred but not yet paid.
Step 2: Know that when we record an adjusting entry for accrued expenses, we need to increase the expense account.
Step 3: Realize that increasing the expense account means we are adding a debit to the trial balance.
Step 4: Understand that we also need to increase a liability account (like 'Accrued Expenses Payable') to show that we owe this money.
Step 5: Know that increasing the liability account means we are adding a credit to the trial balance.
Step 6: Remember that in accounting, total debits must equal total credits for the trial balance to be balanced.
Step 7: Conclude that by adding both a debit (for expenses) and a credit (for liabilities), the trial balance remains balanced.
