Incurred but Unpaid Expenses That Are Recorded During the Adjusting

question 105

Multiple Choice

Incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are called

• A) Operating expense
• B) Prepaid expenses
• C) Unearned expense
• D) Accounts payable
• E) Accrued expenses

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Definitions:

Implicit Costs

The opportunity costs of using resources owned by the firm for its own use, rather than earning income from these resources elsewhere.

Explicit Costs

Direct, out-of-pocket payments for inputs or resources employed in the production of goods or services.

Total Cost

The aggregate amount of expenses incurred by a business in producing goods or services, including both fixed and variable costs.

Economic Profit

The variance between gross receipts and all outlays, including both tangible and intangible costs.