Question

Classify the following items as (a) prepaid expense, (b) unearned revenue, (c) accrued revenue, or (d) accrued expense:

Answer 1

Answer & Explanation :

a. Prepaid Expenses : These are expenses paid before the due date.

Eg -  April'19 rent already paid in March'19

b. Unearned Income : These are revenues received before the due date. It is  also called Advance Income

Eg - March'19 commission already received in Feb'19.

c. Accrued Revenue : These are revenue earned & due to be received, but still not received. It is also called Outstanding Income.

Eg - March'19 commission earned revenue not received till March'19 end

d. Accrued Expense : These are expenses due but not paid. It is also called Outstanding Expense.

Eg - March'19 rent not paid till March'19 end