Example 3- Salaries go From Accrued Liabilities to Accrued Expenses. An adjusting entry for accrued expenses involves: (Select all that apply.) An adjusting entry to record an accrued expense involves a debit to a(n) Ans : (D)Expense account and a credit to a liability account. Adjusting entries are required at the end of each fiscal period to align the revenues and expenses to the “right” period, in accord with the matching principle Matching Principle The matching principle is an accounting concept that dictates that companies report expenses at the same time as the revenues they are related to. Then, on March 7, when you get paid and deposit the money in the bank, you move the money from revenue to cash. Adjusting Entries. There are two types of adjusting entries: 1. Example adjusting entry. Accrued liabilities are liabilities not yet recorded at the end of an accounting period.They represent obligations to make payments not legally due at the balance sheet date, such as employee salaries. Adjusting entries allow you to adjust income and expense … An adjusting entry to record an accrued expense involves a debit to a(an): a. expense account and a credit to a prepaid account. a. For example, a service providing company may receive service fee from its clients for more … In your general ledger, the adjustment looks like this. There are two ways of recording prepayments: (1) the asset method, and (2) the expense method. 26. An adjusting entry always involves either income or expense account. b. expense account and a credit to Cash. The adjusting entry for prepaid expense depends upon the journal entry made when it was initially recorded. c. expense account and a credit to a liability account. Adjusting Entries – Why Do We Need Adjusting Journal Entries? First, you make an adjusting entry, moving the revenue from a “holding account” (accrued receivables) to a revenue account (revenue.) Add your answer and earn points. Prepayments: Types. –––– To record revenue earned that was previously received as cash in advance. Classify the following adjusting entries as involving prepaid expenses (PE), unearned revenues (UR), accrued expenses (AE), or accrued revenues (AR). Explanation: Accrued expenses are ex view the full answer c. Example of an Accrual Adjusting Entry for Expenses. Under the asset method, a prepaid expense account (an asset) is recorded when the amount is paid. 25. Liability/expense adjustments—involves accrued liabilities. To make sure that the expenses of an accounting period are matched with the revenues, entries are made at the end of an accounting period to “adjust” the account balances accordingly. The balance in Repairs & Maintenance Expense at the end of the accounting year will be closed and the next accounting year will begin with $0. For example, interest expense on loan accrued in the current period but not yet paid. –––– To record annual depreciation expense. Adjusting entries are Step 5 in the accounting cycle and an important part of accrual accounting. For this service, New Corp agrees to pay commissions of 5% of sales with payment made 10 days after the month ends. The adjusting entry for Accounts Payable in general journal format is: The balance in the liability account Accounts Payable at the end of the year will carry forward to the next accounting year. The purpose of adjusting entries: According to accrual concept of accounting, revenue is recognized in the period in which it is earned and expenses are recognized in the period in which they are incurred.Some business transactions affect the revenue and expenses of more than one accounting period. Asset Method. 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