What is the impact of an accrued expense on the trial balance?

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Question: What is the impact of an accrued expense on the trial balance?

Options:

Correct Answer: Increase expenses and increase liabilities

Solution:

Accrued expenses increase expenses and increase liabilities, thus impacting the trial balance.

What is the impact of an accrued expense on the trial balance?

What is the impact of an accrued expense on the trial balance?

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 an accrued expense is recorded, it increases the total expenses on the income statement.
Step 3: Note that increasing expenses will decrease net income, which is reflected in the equity section of the balance sheet.
Step 4: Understand that accrued expenses also create a liability on the balance sheet, as the company owes this amount.
Step 5: Realize that when you record an accrued expense, you make a journal entry that affects both the expense account and the liability account.
Step 6: Finally, know that these changes will be reflected in the trial balance, showing higher expenses and higher liabilities.

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