Question

During the year, Cheng Company paid salaries of $24,000. In addition, $8,000 in salaries has accrued by the end of the year but has not been paid.
The year-end adjusting entry would include which one of the following?

A. Debit to Salaries Expense for $32,000.
B. Credit to Salaries Expense of $8,000.
C. Debit to Salaries Payable for $24,000.
D. Credit to Salaries Payable for $8,000.

Answer 1

Answer:

Correct answer is D. Credit to Salaries Payable for $8,000

Explanation:

Based on the basic underlying guideliness in accounting, specifically matching principle. All income and expenses should be reported during the period it incurred. Thus, all expenses incurred during the period even though it wasn't paid yet shoud be recorded to the book and that's the moment that the year-end adjusting entry is necessary.

On the above given problem, the salaries paid of $24,000 is presumed to have been recorded in the book already. Because it incurred and paid within the calendar period. In addition, the salaries accrued by the year end needs year-end adjustment to recognize the salaries expense applicable for the period. Journal entry of it is to debit salaries expense and credit salaries payable in the amount of $8,000.