Question

Danette hasn't paid the first quarter water bill on her property that was due on April 1. She's closing with her buyer, Jason, on April 1. What type of expense is this and how will it appear on the settlement statement?\

Answer 1

Answer:

It is an accrued expense. On the settlement statement, the accrued expense will appear as a seller debit and a buyer credit.

Explanation:

Accrued expenses are those expenses that have been incurred but have not been paid yet. According to the matching principle, expenses are to be recorded in the period they are incurred and not in the accounting period they will be paid. Accrued expenses are liabilities and they imply that the individual is to pay them in the near future.

With respect to the settlement statement, it is worth mentioning that it is a document where the fees and charges to be paid by a seller and a buyer are shown. In the case at issue, it is Danette's duty to pay the water bill. That is why it appears as a seller debit on the settlement statement.