Which of the following best describes accrued expenses?

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Prepare for the Fundamentals of Accountancy, Business, and Management (FABM) 1 Exam. Study efficiently with multiple choice questions and detailed explanations. Enhance your knowledge and succeed in your exam with confidence.

Multiple Choice

Which of the following best describes accrued expenses?

Explanation:
Accrual accounting records expenses when the resource is used, not when cash changes hands. Accrued expenses are amounts owed for expenses that have been incurred but not yet paid, creating a liability (accrued liabilities) that will be settled later. That’s why the best description is expenses recognized before cash is paid: the expense is recorded in the period it’s incurred, with cash payment occurring later. The other statements describe situations tied to cash timing or to revenue rather than expenses, so they don’t describe accrued expenses.

Accrual accounting records expenses when the resource is used, not when cash changes hands. Accrued expenses are amounts owed for expenses that have been incurred but not yet paid, creating a liability (accrued liabilities) that will be settled later.

That’s why the best description is expenses recognized before cash is paid: the expense is recorded in the period it’s incurred, with cash payment occurring later. The other statements describe situations tied to cash timing or to revenue rather than expenses, so they don’t describe accrued expenses.

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