Unpaid Expenses and Profit/Loss Records
Question
Any expenses that are incurred but not paid by the end of the year are counted in our records of profit and loss, are called:
Answers
Explanations
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A. B. C. D.A
The correct answer is A. Accruals.
Accrual accounting is a method of accounting that records revenues and expenses when they are earned or incurred, regardless of when cash is exchanged. This is in contrast to cash accounting, which records revenues and expenses when cash is received or paid.
In accrual accounting, expenses are recognized when they are incurred, regardless of whether or not they have been paid. Any expenses that are incurred but not paid by the end of the year are counted in the records of profit and loss as accruals.
For example, suppose a company incurs $10,000 in expenses in December but does not pay those expenses until January of the following year. Under accrual accounting, the company would recognize those expenses in December and record them as accruals, even though they were not paid until the following year.
Depreciation is the allocation of the cost of a long-term asset over its useful life, and is not directly related to expenses that are incurred but not paid. Expenses refer to costs that are incurred in the normal course of business operations. Financial record is a broad term that can refer to any type of record-keeping related to finances, and is not a specific term used in accrual accounting.
