Question

Which of the following journal entries is correct when a company has incurred an expense for work performed but has not yet paid for these wages to employees?

1) Debit Wages Expense, Credit Accounts Payable
2) Debit Accounts Payable, Credit Wages Expense
3) Debit Wages Payable, Credit Cash
4) Debit Cash, Credit Wages Payable

Answer 1

The correct journal entry for an expense incurred but not yet paid is to Debit Wages Expense and Credit Accounts Payable, reflecting the increase in expenses and a new liability.

Step-by-step explanation:

The correct journal entry when a company has incurred an expense for work performed but has not yet paid for these wages to employees is: Debit Wages Expense, Credit Accounts Payable. This is because when an expense is incurred, the corresponding expense account should be debited, reflecting an increase in expenses. Since the payment has not yet been made, a liability account, typically 'Accounts Payable' or 'Wages Payable', should be credited, indicating the company's obligation to pay in the future.

Choices 2) and 4) are incorrect as they suggest payment has already been made or that the expense is being reduced, which is not the case. Choice 3) is incorrect because it credits cash, indicating payment, which has not yet happened in this scenario.