Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 25 - No. 48)
What is a key difference between accrued expenses and prepaid expenses?
Accrued expenses are recognized even if cash hasn't been paid.
Prepaid expenses represent costs paid in advance.
Accrued expenses involve a liability.
Prepaid expenses increase assets.
Explanation
Accrued expenses are those costs incurred but not yet paid, while prepaid expenses are paid in advance. Accrued expenses result in a liability, whereas prepaid expenses represent an asset.
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