Question

Green Living Construction Company installs solar panels in large newly constructed buildings. The company employs several expert installers who work on a full-time basis. Although the installers work every day, the company pays them at the end of the month, for the previous month's work. Employee salaries are recorded as ___________ on Green Living's balance sheet.

Answer 1

The salaries of the employees of Green Living must be recordered in the Balance Sheet as a Payroll Liabilities.

Step-by-step explanation:

The accountancy should be always recordered under the Accrual basis of accounting, which means, record all the accounting transactions when they occur, revenues or expenses rather that the time the are paid.

In that order the salaries must be registered in the month that they occur, for example, if the employees work in january, the expense must be recorder in january even if the salaries are paid in february or even other month.

This is necessary to match revenues with related expenses according the period.

It is important to be aware that in accountancy you can use two methods, the accrual basis and the cash basis. Nevertheless the most used is Accrual basis.