Question

Knowledge Check 01 A company is in its first month of operations. The company pays total salaries to its employees of $600 per day. For the first four weeks of January (28 days), the company paid its employees $16,800 cash. For the final three days in January, employees earn $1,800 in additional salaries that will not be paid until February 4. What adjusting entry would be made at the end of January? Post the adjusting entry for the scenario provided. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Company did not pay employees $1,800 they were supposed to at the end of January which means they owe the employees.

As per the Accrual principle of Accounting, expenses are to be recorded when incurred not when paid so the salaries will be recorded as a liability (salaries payable) that will be settled when the amount is paid.

Jan, 31

DR Salaries Expense.........................................................$1,800

CR Salaries Payable .......................................................................$1,800