If my electricity and water expenses is accrued by 1150 given in the additional information and in the books it is recorded as 8450, should I record it in the income statement unde... If my electricity and water expenses is accrued by 1150 given in the additional information and in the books it is recorded as 8450, should I record it in the income statement under other expenses?
Understand the Problem
The question is asking for clarification on how to appropriately record discrepancies between accrued expenses for electricity and water in the income statement. Specifically, it references how to categorize these expenses in the books.
Answer
Record the accrued 1150 under 'other expenses' in the income statement.
Since the accrued expenses are different from the recorded amount, an adjustment needs to be made in the income statement. The accrued portion (1150) not yet recorded (part of the total 8450 recorded) should be recognized, and it can be included under "other expenses."
Answer for screen readers
Since the accrued expenses are different from the recorded amount, an adjustment needs to be made in the income statement. The accrued portion (1150) not yet recorded (part of the total 8450 recorded) should be recognized, and it can be included under "other expenses."
More Information
Accrual accounting requires you to recognize expenses when they are incurred, not necessarily when they are paid. This helps in matching the incurred expenses with the related revenues, giving a clearer picture of financial performance for the period.
Tips
A common mistake is to ignore the need for adjusting entries when expenses are accrued but not yet recorded. Always ensure all accrued expenses are reflected in the financial statements.
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