When an expense is incurred prior to the payment of cash for that expense, an adjustment that increases an expense account and increases a liability is prepared.

Question

Quizplus · Accepted Answer

This adjustment is known as an accrual and is used to recognize and record expenses that have been incurred but not yet paid for. It increases the expense account to reflect the amount of the expense, and increases the liability account to reflect the amount that is owed but not yet paid.

When an Expense Is Incurred Prior to the Payment of Cash