At the end of an accounting period, an accrued expense is best described as an expense that is:
Correct answer: B. Consumed but unpaid at the reporting date
- A. Paid and consumed during the same period
- B. Consumed but unpaid at the reporting date
- C. Paid but related to a future period
- D. Estimated but unrelated to any obligation
Explanation
An accrued expense has already been incurred because the related goods or services have been received, but payment has not yet been made. It is recorded in the current period with a corresponding liability. A payment for a future period is a prepayment instead.
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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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