The document discusses accounting for accrued expenses. It provides an example of a firm that accrued $900 for unpaid December telephone expenses. A journal entry is made on December 31st to record this as an expense and current liability. In January, the firm pays $2,090 for the December and January phone bills. This payment is recorded by debiting various expense accounts and crediting cash. The accrued amount reduces the current liability account.

1. 14.6
ACCOUNTING FOR
ACCRUED EXPENSES

2. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
14.6 ACCOUNTING FOR ACCRUED
EXPENSES
 Recording an accrued expense
 For the year ended 31 December 2015, a firm had paid telephone expenses of
$8,000 for the period
2015
EXPENSE $8000
Telephone Expense [E]
31 Dec Cash at Bank 8000
31 Dec Accrued Telephone Exp. 900
Telephone Expense [E]
31 Dec Cash at Bank 8000
31 Dec Accrued Telephone Exp. 900

3. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 On 31 December 2015 the firm also had a phone bill for December that
has not yet been paid for the amount of $900 plus $90 GST
2015
Balance-
Day
Unpaid
December’s Phone Bill
$900 plus GST
CURRENT LIABILITIY $900
LIABILITY $900
• There is a present obligation
to pay the phone bill
• Arising from a past event –
being the phone calls made
during the month
• Resulting in an outflow of
future economic benefits –
the bill will be repaid
Balance Sheet at 31 December
Current Liabilities $
Accrued telephone 900
EXPENSE $900
EXPENSE $900
• Outflow of economic benefits
– the phone calls have been
consumed
• There is an  in Liabilities –
the Accrued Telephone
Expenses account
• There is a  in Owner’s
Equity
Income Statement 2015
Other Expenses $
Telephone expenses 8000
=
Total
Telephone
Expense
Paid
Expenses +
Accrued
Expenses$8000 $900$8900
Income Statement 2015
Other Expenses $
Telephone expenses 8900
14.6 ACCOUNTING FOR ACCRUED
EXPENSES
To be paid in…

4. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 A balance-day adjustment is required in the General Journal to record
the $900 of accrued telephone expenses
Telephone Expense [E]
31 Dec Cash at Bank 8000
31 Dec Accrued Telephone Exp. 900
Accrued Telephone Expenses [L]
31 Dec Telephone Expenses 900
General Journal
Date Account DEBIT CREDIT
31 Dec Telephone Expense [E] 900
Accrued Telephone Expense [L] 900
General Journal
Date Account DEBIT CREDIT
31 Dec Telephone Expense [E] 900
Accrued Telephone Expense [L] 900
Telephone Expense [E]
31 Dec Cash at Bank 8000
31 Dec Accrued Telephone Exp. 900
General Journal
Date Account DEBIT CREDIT
31 Dec Telephone Expense [E] 900
Accrued Telephone Expense [L] 900
Accrued Telephone Expenses [L]
31 Dec Telephone Expense 900
14.6 ACCOUNTING FOR ACCRUED
EXPENSES

5. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 The Telephone Expense account can now be closed to calculate profit
Telephone Expense [E]
31 Dec Cash at Bank 8000
31 Dec Accrued Telephone Exp. 900 31 Dec Profit & Loss Summary 8900
8900 8900
General Journal
Date Account DEBIT CREDIT
31 Dec Profit & Loss Summary 8900
Telephone Expenses 8900
Profit & Loss Summary [OE]
31 Dec Telephone Expense 8900
General Journal
Date Account DEBIT CREDIT
31 Dec Profit & Loss Summary 8900
Telephone Expenses 8900
Profit & Loss Summary [OE]
31 Dec Telephone Expense 8900
General Journal
Date Account DEBIT CREDIT
31 Dec Profit & Loss Summary 8900
Telephone Expenses 8900
Telephone Expense [E]
31 Dec Cash at Bank 8000
31 Dec Accrued Telephone Exp. 900 31 Dec Profit & Loss Summary 8900
8900 8900
14.6 ACCOUNTING FOR ACCRUED
EXPENSES

6. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 On 15 January 2016 the firm made a payment for $1,900 plus $190 GST for
the:
 December 2015 phone bill - $900 plus $90 GST
 January 2016 phone bill - $1,000 plus $100 GST
January 2016
Paid
December 2015 Phone Bill
$900 plus GST
Paid
January 2016 Phone Bill
$1,000 plus GST
$990 $1,100 = $2,090+
14.6 ACCOUNTING FOR ACCRUED
EXPENSES
Incurred in…
Incurred in…

7. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 This is recorded in the Cash Payments Journal on 15 January 2016 as follows…
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Telephone
Expenses
Sundries GST
15 Jan Accrued Telephone Exp. 101 2090 900 90
Telephone Exp. 1000 100
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Telephone
Expenses
Sundries GST
15 Jan Accrued Telephone Exp. 101 2090 900 90
Telephone Exp. 1000 100
January 2016
Paid
December 2015 Phone Bill
$900 plus GST
Paid
January 2016 Phone Bill
$1,000 plus GST
$990 $1,100 = $2,090+
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Telephone
Expenses
Sundries GST
15 Jan Accrued Telephone Exp. 101 2090 900 90
Telephone Exp. 1000 100
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Telephone
Expenses
Sundries GST
15 Jan Accrued Telephone Exp. 101 2090 900 90
Telephone Exp. 1000 100
14.6 ACCOUNTING FOR ACCRUED
EXPENSES
Incurred in…
Incurred in…

8. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 This is recorded in the Cash Payments Journal on 15 January 2016 as follows…
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Telephone
Expenses
Sundries GST
15 Jan Accrued Telephone Exp. 101 2090 900 90
Telephone Exp. 1000 100
Goes in the
Sundries Column
Repayment of an
Accrued Expense is
not entered in the
Telephone Expenses
Column
Only 1 total figure in
the Bank Column
GST split over
the 2 lines
14.6 ACCOUNTING FOR ACCRUED
EXPENSES

9. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 This is recorded in the Cash Payments Journal on 15 January 2016 as follows…
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Telephone
Expenses
Sundries GST
15 Jan Accrued Telephone Exp. 101 2090 900 90
Telephone Exp. 1000 100
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Telephone
Expenses
Sundries GST
15 Jan Accrued Telephone Exp. 101 990 900 90
Telephone Exp. 1100 1000 100
14.6 ACCOUNTING FOR ACCRUED
EXPENSES

10. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 The Cash Payments Journal is then posted to the General Ledger at the end of
the month
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Telephone
Expenses
Sundries GST
15 Jan Accrued Telephone Exp. 101 2090 900 90
Telephone Exp. 1000 100
Accrued Telephone Expenses [L]
31 Dec Telephone Expense 900
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Telephone
Expenses
Sundries GST
15 Jan Accrued Telephone Exp. 101 2090 900 90
Telephone Exp. 1000 100
Accrued Telephone Expenses [L]
31 Jan Cash at Bank 900 31 Dec Telephone Expense 900
Accrued Telephone Expenses [L]
31 Jan Cash at Bank 900 31 Dec Telephone Expense 900
900 900
14.6 ACCOUNTING FOR ACCRUED
EXPENSES

11. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
TASK
In-class Homework
SQ8 X
SQ9 X
SQ10 X
Ex14.6 X
Ex14.7 X