Chapter 3, Problem 3.6EX

To determine

Accruals:

Accruals refer to the revenues that are generated from goods delivered or, service performed to the customer, but cash is not yet received from the customer, and the expenses are incurred, but cash is not yet paid.

Accruals are classified into two types.  They are accrued revenues, and accrued expenses.

Accrued revenues: Revenues are generated but not yet received in cash.

Accrued expenses: Expenses are incurred but not yet paid in cash.

The expense recognition principle:

The expense recognition principle refers to the expenses that should match with revenue (matching principle) in the period when the company incurred expenses in order to generate the revenue, doesn’t matter, payment is made or not.

To calculate: The amount of wages paid during the May month.