Multiple Choice
Theo needs to record new income earned by his business. Which of the following journal entries correctly reflects this transaction?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Javier needs to record the month-end adjustment for accrued salaries of \$2,000 that have not yet been paid. Which of the following journal entries should he make?
A
Debit Cash \$2,000; Credit Salaries Expense \$2,000
B
Debit Salaries Payable \$2,000; Credit Salaries Expense \$2,000
C
Debit Salaries Expense \$2,000; Credit Salaries Payable \$2,000
D
Debit Salaries Expense \$2,000; Credit Cash \$2,000
Verified step by step guidance1
Understand the concept of accrued salaries: Accrued salaries represent expenses that have been incurred but not yet paid. These are recorded as liabilities because the company owes this amount to employees.
Identify the correct accounts to use: Since the salaries have been incurred but not paid, the Salaries Expense account should be debited to recognize the expense, and the Salaries Payable account should be credited to record the liability.
Determine why Cash is not involved: Cash is not credited because no payment has been made yet. The adjustment is only to recognize the expense and liability, not to record a cash transaction.
Write the journal entry: The journal entry should be structured as follows: Debit Salaries Expense \$2,000 (to increase expenses) and Credit Salaries Payable \$2,000 (to increase liabilities).
Review the impact on financial statements: This adjustment increases expenses on the income statement and liabilities on the balance sheet, ensuring accurate financial reporting for the period.
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