Which of the following adjusting entries for accrued expenses creates a future deductible amount?

• A. Prepaid insurance
• B. Accrued salaries payable
• C. Unearned revenue
• D. Depreciation expense

Answer: (B)

Verified step by step guidance

1. Understand the concept of accrued expenses: Accrued expenses are liabilities that represent expenses incurred but not yet paid. These are recorded as adjusting entries at the end of the accounting period.
2. Identify the nature of accrued salaries payable: Accrued salaries payable is an adjusting entry that records salaries earned by employees but not yet paid. This creates a liability on the balance sheet and an expense on the income statement.
3. Recognize how accrued salaries payable creates a future deductible amount: When salaries are paid in the future, the liability is reduced, and the payment is deductible for tax purposes, as it represents an expense incurred in the current period.
4. Differentiate accrued salaries payable from other options: Prepaid insurance represents an asset, unearned revenue is a liability for revenue received in advance, and depreciation expense is a non-cash expense that reduces the value of an asset over time. None of these create a future deductible amount in the same way accrued salaries payable does.
5. Conclude that accrued salaries payable is the correct answer because it directly results in a future deductible amount when the liability is settled through payment.