Which of the following accounts is used to record an accrual for expenses?

Question

BlackTom AI · Accepted Answer

Let’s break down the question and evaluate each option in terms of accrual accounting.
Option 1: Unearned revenues. This account records amounts received before services are performed or goods delivered, which is a liability related to revenue, not expenses. It does not reflect an accrual for expenses, so this is incorrect.
Option 2: Accounts receivable. This asset represents amounts owed to the entity by customers for goods or services already provided. While it relates to revenues and receivables, it does not represent an accrual for expenses, making this choice inappropriate.
Option 3: Interest payable. This liability arises when interest expense has been incurred but not yet paid. It directly matches the idea of an accrual for expenses, recognizing the cost and the obligation to pay in the future. Therefore, this option aligns with accrual accounting for expenses.
Option 4: Cash. This asset reflects actual cash on hand or in the bank. An accrual for expenses does not involve cash at the moment of recognition; cash would be affected only when payment is made. Hence, this is not the correct choice.
In summary, the only option that correctly represents an accrual for expenses is the one that records an outstanding obligation to pay interest, i.e., Interest payable. The other options relate to revenues, receivables, or cash, none of which depict accruing an expense.

Which of the following accounts is used to record an accrual for expenses? Single choice

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