An accrued expense appears in which section of financials? (A) Cash flow from Investing (B) Non-Current assets (C) Current Liabilities (D) Deferred Revenue
Answer (1)
In the context of financial accounting, an accrued expense refers to an expense that has been incurred but not yet paid. It represents an obligation that a company needs to recognize in its financial records.
To solve the multiple-choice question, we need to determine the correct section where accrued expenses appear on financial statements:
(A) Cash flow from Investing : This section of the cash flow statement pertains to transactions involving the purchase and sale of long-term investments and property, plant, and equipment. Accrued expenses do not fit into this category.
(B) Non-Current Assets : These are assets that are expected to provide economic benefits beyond the current financial year, such as equipment, buildings, or long-term investments. Accrued expenses do not classify as non-current assets.
(C) Current Liabilities : Accrued expenses are obligations that a company has incurred but not yet paid, typically within a year. They are considered a type of current liability on the balance sheet, alongside other items like accounts payable. Hence, accrued expenses belong in this section.
(D) Deferred Revenue : This represents payments received by a company before the goods or services have been delivered. While it's a liability, it's not the same as accrued expenses, which are expenses owed by the company, not payments received in advance.
Therefore, the correct answer is (C) Current Liabilities .
Understanding where accrued expenses appear in the financials helps businesses manage their short-term obligations effectively and provides insight into their financial health by accurately portraying what is owed at any given time.
