An accrued expense has an opening balance of Rs 8,000. During the year, cash paid for the expense is Rs 70,000, and the closing accrual is Rs 12,000. What expense is charged for the year?
Correct answer: C. Rs 74,000
- A. Rs 66,000
- B. Rs 70,000
- C. Rs 74,000
- D. Rs 90,000
Explanation
Expense equals cash paid plus the closing accrual minus the opening accrual. Therefore, Rs 70,000 + Rs 12,000 - Rs 8,000 gives Rs 74,000.
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About Accruals, Prepayments and Provisions
Accruals and prepayments adjust income and expenses to the accounting period in which they are earned or incurred, following the matching principle. Provisions recognise expected obligations or losses when their amount or timing is uncertain, which distinguishes them from ordinary accruals and from general reserves.
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