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How to record Accrued Expenses? - YouTube
Channel: The Accounting Student
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if you know what the crews and expenses
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are do you know how to record them in
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the accounts
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I'm Thomas Harwood and welcome to the
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accounting student where we create free
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and short videos so that you can know
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about account in today's video is a
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canal to record accrued expenses in
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double-entry as previously mentioned in
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the video on what are accruals and pre
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payments an accrual is an adjustment to
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match the expenses used in a period
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Acronis play a vital role to make sure
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that the financial records show true and
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fair reflection of an organization and
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its activities an accrued expense is
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where the amount paid is lower than
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amount of expenses incurred that amounts
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to Owen is accrued and since it actually
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belongs to this current period it must
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be added to the amount already paid this
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follows a principle for treating across
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as also mentioned in the video and what
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are accruals and pre payments whereby
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accruals you add and for pre payments
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you deduct so accrues at pre payments
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deducts let's look at some examples to
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demonstrate accrued expenses rent for
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the shop of Ben the Baker for the
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financial year is 16 thousand pounds it
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has been agreed from the start that the
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rent is to be paid quarterly to the
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landlord
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however at the end of the year payment
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for the last quarter is still owing how
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do we record this in ben's
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accounts first of all here is a table
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shown when the rent was due and when the
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rent was paid as you can see rent was
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paid each quarter during the year on the
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31st of march 30th of june and 30th of
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september except for the last quarter it
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was owed on the 31st of December 2017
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but was not paid until the 10th of
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January 2018 let's add information for
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the first three quarters like so the
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rent for the last quarter was paid on
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the tenth for January 2018 and so will
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appear in the accounts of 2018 which is
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a next trade
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year of the business the rent expense
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2017 is sixteen thousand pounds for the
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year of rent and since that the accruals
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and matching concept states of the
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expenses and income recorded in the
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accounts should relate to the time
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period of those accounts at the end of
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the trading year the yearly rent amount
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is to be transferred to the profit and
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loss account but if sixteen thousand
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pounds was put on the credit side of the
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rent account like so the account would
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be out of balance by four thousand
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pounds because the payment was due on
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the 31st of December 2017 and was not
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made until the tenth for January 2018 if
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we were to post a sixteen thousand
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pounds to the profit and loss account we
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would have sixteen thousand pounds on
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the credit side and only twelve thousand
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pounds on the debit side something seems
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wrong here therefore to make their
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account balance four thousand pounds
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Wren Owen in 2017 but paid in 2018 must
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be carried down to 2018 as a credit
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balance because it is a liability on the
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31st of December 2017 instead of four in
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Owen it can be called rent accrued or
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simply an accrual therefore the rent
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account for Ben the Baker can now be
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shown as this additionally the balance
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carried down can be called accrued
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carried down and this is to explain what
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the balance is for for an accrued
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expense so that was the explanation of
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how to record accrued expenses in
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double-entry if you enjoyed it press
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accounting student thanks for watching
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we'll see you next time
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