After recording accrued expenses, which financial statement is immediately impacted?

Recording accrued expenses has a direct effect on the Income Statement. This is because accrued expenses represent expenses that have been incurred during a period but have not yet been paid in cash. By recording these expenses, the company reflects an increase in expenses, which in turn reduces net income for that accounting period. This is in line with the matching principle of accounting, where expenses must be recognized in the same period as the revenues they help to generate, providing a more accurate picture of the company's financial performance. As a result, the Income Statement is immediately impacted when accrued expenses are recorded.

The Balance Sheet will also be affected as it will show the increase in liabilities, and the Cash Flow Statement will ultimately reflect changes when the cash is paid. However, the immediate impact is on the Income Statement. The Statement of Retained Earnings will be indirectly affected later when net income is transferred into retained earnings, but it is not the first statement impacted by the recording of accrued expenses.