Question

03 Discussion Question We have learned about four types of adjustments: (1) prepaid expenses, (2) unearned revenues, (3) accrued revenues, and (4) accrued expenses. Select one specific adjusting entry that falls under one of the four types, enter it in the subject box, and post the following: 1. A description of the adjustment and why it is necessary. 2. Provide an example of the transaction; include the debit and credit, with dates and amounts in the proper journal entry format. 3. In your replies discuss the status of the accounts affected prior to the adjustment (understated or overstated), and explain the impact of the adjustment on the financial statements. The following example is for supplies: 1. The adjusting entry for supplies is a prepaid expense entry. Supplies requires an adjustment because the amount in the supplies account does not represent what we actually have on hand. The the amount that we have used is an expense. 2. The example using supplies: We determine that $500 in supplies have been used during the period. The journal entry is: 12/31/19 Supplies 500 expense Supplies 500

Answer 1

An accrued expense is an accounting term that refers to an expense that is recognized in the books before it has been paid.It is necessary because of the matching principle where we record the revenues and all related expenses in the same accounting period.

One example of accrued expense is Interest Payable.

Date	Particulars	Amt.Dr	Amt. Cr
Dec 31,2019	Interest Expense	500
	To Interest Payable		500
	(Being interest for the year 2019, debited to interest account)

Before entering this entry, there was no interest expense as it was not paid, but the expense has been incurred because we are using the money in our business and we need to pay a cost for it.Since we are not paying it now we have to record it has an accrued expense.