Question

A governmental entity has a General Fund and an Enterprise Fund. At the beginning of the year, neither fund has any unpaid salary liability. During the year, both funds paid salaries of $600,000. In addition, salaries for the last three days of the fiscal year ($15,000 for each fund) will be paid during the first week of the next fiscal year. How much should each fund report as salary expenditures (expenses) for the fiscal year?

Answer 1

Answer: $615,000; $615,000

Step-by-step explanation:

According to the Accrual Principle of Accounting, expenses are to be recorded in the period that they were incurred even if they were only paid off in another period.

The $15,000 salary expense for each fund will be incurred in the current fiscal year so even though it is only to be paid in the next year, it should be recorded in the current fiscal year. This would then bring the total of each of the funds to $615,000.