Expense items that have been incurred but not yet recorded in the accounts are: A) unearned revenues. accrued expenses. accrued revenues. prepaid expenses.
Expense items that have been incurred but not yet recorded in the accounts are: A) unearned revenues. accrued expenses. accrued revenues. prepaid expenses.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:### Understanding Unrecorded Expense Items
In accounting, it is crucial to properly categorize and record all financial transactions. Sometimes, expenses that have been incurred are not yet recorded in the accounts. These unrecorded expenses are significant for accurate financial reporting.
**Question:**
Expense items that have been incurred but not yet recorded in the accounts are:
A. Unearned revenues.
B. Accrued expenses.
C. Accrued revenues.
D. Prepaid expenses.
#### Explanation:
- **A. Unearned Revenues**: This refers to money received by a business for a service or product that has yet to be delivered or provided. This is not an expense but rather a liability.
- **B. Accrued Expenses**: These are expenses that have been incurred but not recorded in the accounts. Examples include interest expenses, utility bills, and salaries that have been earned by employees but not yet paid by the company.
- **C. Accrued Revenues**: This refers to revenues that have been earned but not yet recorded or received. This is an asset rather than an expense.
- **D. Prepaid Expenses**: These are payments made for expenses in advance of when the service or benefit will be received. Examples include prepaid insurance or rent. These are recorded as assets and expensed over time.
**Correct Answer:** B. Accrued expenses
Understanding these concepts ensures accurate financial recording and reporting, which is essential for the transparency and accuracy of an organization's financial statements.
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