Question

Finke Company's employees are paid each Friday for hours worked the previous week. At the end of the accounting period, Finke Company accrues $3,200 for earned salaries that have not yet been paid. Which of the following best describes this accrual transaction type?

a. Asset source transactionb. Asset use transactionc. Asset exchange transactiond. Claims exchange transaction

Answer 1

Answer: Claims exchange transaction

Explanation: In simple words, these are the transactions that do not change the level of total claims, that is, these transactions results in increase on one claim and decrease of the other.

In the given case, the company accrues $3200 to its employees. This transaction will have a dual effect of increase in liabilities and decrease in retained earnings, so the overall claims will remain unchanged.

Hence we can conclude that the correct option is D .