Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

Which of the following journal entries correctly records the payment of wages to employees, as reported on a W-2 form?

Debit Wages Expense; Credit Cash

Debit Cash; Credit Wages Expense

Debit Wages Payable; Credit Wages Expense

Debit Salaries Payable; Credit Cash

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Verified step by step guidance

Understand the nature of the transaction: The payment of wages to employees involves reducing cash (an asset) and recognizing the expense associated with wages. This is typically recorded as a debit to Wages Expense and a credit to Cash.

Recall the accounting principle: Expenses are debited because they decrease equity, and cash is credited because it decreases assets.

Analyze the options provided: The correct journal entry should reflect the payment of wages as a reduction in cash and an increase in expenses. This aligns with the option 'Debit Wages Expense; Credit Cash.'

Eliminate incorrect options: 'Debit Cash; Credit Wages Expense' is incorrect because cash is being paid out, not received. 'Debit Wages Payable; Credit Wages Expense' is incorrect because it involves a liability account, which is not relevant here. 'Debit Salaries Payable; Credit Cash' is incorrect because it refers to salaries payable, not wages expense.

Conclude the correct journal entry: The correct journal entry for recording the payment of wages is 'Debit Wages Expense; Credit Cash,' as it properly reflects the reduction in cash and recognition of the expense.