Question

18. What effect does recognizing an accrued liability for utilities at the end of the accounting period have on the accounting equation?

a.Liabilities increase and stockholders' equity decreases.

b.Assets decrease and liabilities decrease.

c.Assets decrease and stockholders' equity decreases.

d.Liabilities increase and stockholders' equity increases.

Answer 1

answer: a. liabilities increase and shareholders equity decreases

Explanation

1. Accrued liability is treated and recorded on the basis of accrual concept

2. Generally accrued liabilities increases the liabilities and decreases the shareholders equity

3. Accrued liabilities will be paid in the future and these are recoded in the balance sheet on liabilities side

4. incase of the accrued liability the journal entry as folloes

Debit utilities expense and credit utilities payable .