Final answer:
An adjusting entry for accrued expenses records expenses that have been incurred but not yet paid, affecting both the expense and payable accounts. In QuickBooks Online, this involves debiting the expense account and crediting the payable account for the amount accrued.
Step-by-step explanation:
An example of an adjusting entry for an accrued expense item using the QBO journal would be recording interest that has been incurred but not yet paid by the end of the accounting period. Suppose a business has $500 of unpaid interest at the end of the month. To record this in QuickBooks Online, you would make a journal entry that debits (increases) Interest Expense and credits (increases) Interest Payable, both by $500.
Step-by-step example of the journal entry:
- Debit Interest Expense $500
- Credit Interest Payable $500
This entry increases the company's expenses for that period, ensuring that the financial statements reflect expenses that have been incurred regardless of whether the cash has been paid out. This process aligns with the accrual basis of accounting, which dictates that expenses should be recognized when they are incurred, not when they are paid.