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November 18, 2009

If an accrual adjusting entry increases an expense and a liability, how does the balance sheet remain in balance?

An expense is a temporary account which reduces owner’s equity or stockholders’ equity. The decrease in owner’s equity will offset the increase in the liability account.

Learn more about the Accounting Equation.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.



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Comments

5 Responses to “If an accrual adjusting entry increases an expense and a liability, how does the balance sheet remain in balance?”

  1. Peter on November 24th, 2009 10:34 pm

    Well am good in accounting packages and would like to futher my learning

  2. Peter on November 24th, 2009 10:38 pm

    Am here in nigeria seeking for help hands dat will help promote my studies.

  3. Kafil on December 3rd, 2009 1:36 am

    Suppose, it was accrued an amount of Tk. 5,000 for events management. When the event is implemented it incurred Tk. 5,500. So, in this case in addition net Profit will reduce by Tk.500 and liquid assets also will reduce in addition by Tk.500 (if payment is made). In balance sheet both sides (i.e. NP and CA amounts) it will be reduced by Tk.500 in addition. So, balance sheet both will be balanced
    Or
    If the above addition expenses of Tk.500 are not paid then the event will reduce the NP (decrease liabilities) and will increase accrue amounts (liabilities increase) by the same amount. And in this situation balance sheet balance will be same as it was before.

    Thanks

    Kafil
    Uddin_kafil@yahoo.com

  4. Eric Boykai on January 7th, 2010 10:56 am

    Please discuss the cash and accural basis in full

  5. Bi Bi on January 25th, 2010 12:44 am

    I’d like to know that,if
    we dispose the asset,shall we deduct the Net book value of the asset to the capital amount.I mean I want to know that if we sell (dispose)our asset,In balance sheet,what will be change. i think,asset account,and retain P&L will only be changed.
    Pl clarfy my ques: and thanking u in advance.

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