Question

What is Step 1 of year end adjusting entries in the Periodic system?

1) Recording accrued expenses
2) Recording accrued revenues
3) Recording prepaid expenses
4) Recording unearned revenues

Answer 1

The first step in year-end adjusting entries for a Periodic inventory system is to record accrued expenses, such as wages or utilities, that are incurred but not yet paid at the reporting date.

Step-by-step explanation:

The first step in year-end adjusting entries in a Periodic inventory system is typically to record accrued expenses. Accrued expenses are those that have been incurred but not yet paid or recorded at the date of the financial statements.

Examples of accrued expenses might include wages, utilities, or interest that has been incurred during the period but will be paid in a future period. The adjusting entry would involve debiting the appropriate expense account to recognize the expense and crediting an accrued liability account to acknowledge the obligation to pay.