Unexpired expenses is ______account.a)Realb)Nominalc)Personald)Representative PersonalCorrect answer is option 'D'. Can you explain this answer?

Question

Answer

Representative personal accounts: The accounts recording transactions relating to the expenses and incomes are classified as nominal accounts. But in certain cases due to the matching concept of accounting the amount, on a particular date, is payable to the individuals or recoverable from individuals.

Such amount (a) relates to the particular head of expenditure or income and (b) represents persons to whom itis payable or from whom it is recoverable. Such accounts are classified as representative personal accounts e.g. 'Wages Outstanding Account', Pre-paid Insurance Account. etc.

Answer

The correct answer is 'D' - Representative Personal Account. Unexpired expenses is Representative Personal Account. This is because these accounts are not in the name of any person or any organisation.

Answer

Unexpired Expenses

Unexpired expenses refer to expenses that have been paid in advance but have not yet been consumed or utilized. These expenses are considered as assets because they provide future economic benefits to the organization. They are also known as prepaid expenses or deferred expenses.

Accounting Treatment

Unexpired expenses are recorded in the books of accounts as assets and are initially recognized as an expense. However, since they have not yet been consumed, they are not classified as an expense in the income statement. Instead, they are shown as a deduction from the related expense in the balance sheet.

Account Classification

Unexpired expenses are classified as a personal account in the accounting system. Personal accounts represent accounts of individuals, organizations, or other entities with whom the organization has a financial relationship. These accounts are not related to the nature of the expense but rather to the parties involved.

Examples of Personal Accounts

- Accounts Receivable: Represents amounts owed to the organization by its customers for goods or services provided on credit.
- Accounts Payable: Represents amounts owed by the organization to its suppliers for goods or services received on credit.
- Capital Accounts: Represents the capital invested by the owners in the business.

Why Unexpired Expenses are Classified as Personal Accounts

Unexpired expenses are classified as personal accounts because they represent the organization's financial relationship with itself. It is the organization's own money that has been paid in advance for future expenses. Therefore, it does not fall under the category of real accounts that represent tangible assets, liabilities, or equity.

Conclusion

In conclusion, unexpired expenses are classified as personal accounts in the accounting system. They are assets that have been paid in advance but have not yet been consumed. Unexpired expenses are initially recognized as an expense but are shown as a deduction from the related expense in the balance sheet.

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