Accounting Treatment of Operating Expenses - Case 2: Accrued Expense

Accrued expense is expense incurred by the business. It is expense that has been incurred by the organization although cash associated to that expense is not yet paid by the time the year comes to an end. Accrued expense is classified as a current liability for it represents cash yet to be paid by the business in the future. It is a payable


By 31/12/2018, Our Co. ltd had paid salary in cash of $ 90,000


Record the transactions in the salary expense account

Extract a P& L account at the end of the year 31/12/2018

Extract a balance sheet as at 31/12/2018


Option one: Direct Approach



Option Two: Indirect Accounting Approach

Journal Entries




About the Author - Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers.