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Prepaid expenses are those expenses which are paid already but actual expense is not incurred and when actual expense incurred adjusting entry required to adjust prepaids as in acrual accounting income and expense only recorded when they are actually occured when not when the cash are paid so cash payment is not important to be recognise for transaction occuring.
Expense payable is a current liability.
If adjusting entry not made then profit will be overstated while the expenses will be understated.
Supplies expense is neither an asset nor a liability it is an expense. Prepaid supplies would be an example of an asset and as the supplies are used they become expenses, supplies expense.
The entry increases total assets and increases total expenses
An accrual.
An accrual.
it is Administative Expenses And Indirect Expenses
Prepaid expenses are those expenses which are paid already but actual expense is not incurred and when actual expense incurred adjusting entry required to adjust prepaids as in acrual accounting income and expense only recorded when they are actually occured when not when the cash are paid so cash payment is not important to be recognise for transaction occuring.
Expense payable is a current liability.
Supplies expense is neither an asset nor a liability it is an expense. Prepaid supplies would be an example of an asset and as the supplies are used they become expenses, supplies expense.
If adjusting entry not made then profit will be overstated while the expenses will be understated.
Supplies expense is neither an asset nor a liability it is an expense. Prepaid supplies would be an example of an asset and as the supplies are used they become expenses, supplies expense.
Accrued rent expense is classified as an Expense. It's not classified as a liability. Expenses are paid out of "Revenue" and they affect "Retained Earnings". When you do a Trial Balance before closing out your accounts, Expenses are actually listed with Assets, because all "Expenses" contain a debit balance.There is only one reason an expense would be listed as a liability and that is if you post the transaction before paying it and then the account "Expense Payable" is used and is a liability as it is a "Payable" and actually is not listed with the term "expense" in it. For example if you have Rent Expense, then the two accounts used are Rent Expense and Rent Payable. Notice the "liability" account is actually titled "rent payable" not "rent expense".The term accrued is merely the term used in Accrual Accounting, which simply means that all transactions are recorded as they occur or "accrue" as opposed to cash basis accounting where transactions are recorded only when cash is paid out or received.In actuality if you are trying to classify your accounts, such as the question, classify the following accounts as either an Asset, Liability or Owners Equity Account, Expenses will be classified as an Owners Equity Account as they affect Retained Earnings, which in turn affects Owners Equity (stockholders equity).
The entry increases total assets and increases total expenses
How to correct misclassification of rent expense? It was recorded as rent expense, should have been recorded as prepaid rent with an effective tax rate of 30%.
There are two treatments of expenses as per type of accounting system:In Accrual System:Expenses are recorded when actual expenses occurred and not when actual cash is paid.For Example: Expense occured on 10 July and payment cash paid on 15 July.So in this case expense will be recorded on 10 July.In Cash System:Expenses are recorded when actual cash is paid and not when expense is occurred.For Example: Expense occured on 10 July and payment cash paid on 15 July.So in this case expense will be recorded on 15 July.