Practice question · Select all that apply
Which adjustments create or increase a liability?
Hints
- A new liability appears when the firm owes money it has not paid.
- Recognising a prepaid amount as used shrinks an asset instead.
Show the answer
- B. Accrued interest payable
- C. Accrued wages payable
Why
Accrued wages and accrued interest both create new liabilities (the firm owes money it hasn't paid). Prepaid expense decreases an asset. Recognising unearned revenue decreases a liability.
Practise Adjusting Entries
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