Question

A company owes employee salaries of $5,000 on December 31 for work completed in the current year, but the company doesn't plan to pay those salaries until the following year. What adjusting entry, if any, is needed on December 31?

Multiple Choice

Debit Salaries Payable for $5,000; Credit Salaries Expense for $5,000.

Debit Salaries Payable for $5,000; Credit Cash for $5,000.

Debit Salaries Expense for $5,000; Credit Salaries Payable for $5,000.

Answer 1

The adjusting entry to record the owed salaries is to Debit Salaries Expense for $5,000 and Credit Salaries Payable for $5,000, reflecting the expense when incurred.

Step-by-step explanation:

The correct adjusting journal entry needed on December 31 for the company that owes employee salaries of $5,000 for work completed in the current year is to Debit Salaries Expense for $5,000; Credit Salaries Payable for $5,000. This entry reflects the accrual accounting principle that expenses should be recognized when they are incurred, not when they are paid.

Thus, the company recognizes the salary expense in the current year because the work was completed in that same year, even though the cash payment will be made in the following year.

The adjusting entry to record the owed salaries is to Debit Salaries Expense for $5,000 and Credit Salaries Payable for $5,000, reflecting the expense when incurred.

he correct adjusting journal entry needed on December 31 for the company that owes employee salaries of $5,000 for work completed in the current year is to Debit Salaries Expense for $5,000; Credit Salaries Payable for $5,000. This entry reflects the accrual accounting principle that expenses should be recognized when they are incurred, not when they are paid.

Thus, the company recognizes the salary expense in the current year because the work was completed in that same year, even though the cash payment will be made in the following year.