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Unformatted text preview: en the expense is incurred PREPAID EXPENSE is reduced and an EXPENSE is recorded.
Cash is paid before expense is incurred
Incurred Prepaid expense (+A) xxx Cash (A) xxx
Expense will be recorded when incurred. 3-18 The Matching Principle
If cash is paid after the company receives goods or services, a liability PAYABLE is recorded.
Cash paid after expense is incurred
Incurred Expense (+E) xxx Payable (+L) xxx 3-19 The Matching Principle
When cash is paid the PAYABLE is reduced. Cash paid after expense is incurred
Paid Expense (+E) xxx Payable (+L) xxx
Cash will be paid. 3-20 The Matching Principle Typical assets and their related
expense accounts include. . .
CASH PAID FOR as used over
time becomes EXPENSE Supplies inventory Supplies expense Prepaid insurance Insurance expense Buildings and equipment Depreciation expense 3-21...
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