Can you think of other scenarios or examples of accrued expenses?
Suggested answers to practice activity 6.1
Examples of accrued expenses are:
i. A reporting entity prepares its financial statements to 31 December 2016. Assume that the payment of company income tax is due on 30 June 2017, but it is paid for on 31 October 2018. In this example, tax is an accrued expense in the financial statements because it is due for payment as of 30 June 2017. Yet, it remains unpaid as of that date.
ii. Payment of interest on a loan is due on 30 September 2016, but the interest is paid for 31 July 2017. The reporting entity prepares its financial statements to 30 September every year. In this example, loan interest is an accrued expense in the financial statements because it is due for payment as of 30 September 2016, yet, it is unpaid as of that date.
iii. Payment for waste disposal is due on 1 April 2018, but the payment is made on 30 June 2018. The reporting entity prepares its financial statements to 31 May every year. In this example, waste disposal is an accrued expense in the financial statements because it is due for payment as of 1 April 2018, yet, as of 31 May 2018 it is unpaid.
Can you think of more examples of accrued expenses?
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