Question

The Journal entry to update the accounts for interest expense incurred but not recorded is which of the following types of adjusting entries?

a. Prepaid item

b. Unearned Revenue

c. Accrued Expenses

d. Accrued Revenue

e. Not an adjusting entry

Answer 1

The correct answer is

C) Accrued expenses

Explanation

Accrued expenses refer to the expenses which has been not yet paid for or bill or them has not yet been received, but these expenses related to the revenue earned so these need to be booked in that period only. So adjusting entry will have to be passed for accrued expenses. Interest expense booked at the end of the accounting period is type of this adjusting entries only. Adjusting entry passed for interest expense would be

Particular Debit Credit

Interest expense XXXXX

Interest Payable XXXXX