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

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Expenses

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Expenses

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Multiple Choice

Javier needs to add month-end accruals for salaries that have been earned by employees but not yet paid. Which of the following adjusting entries should he record?

Debit Salaries Payable; Credit Salaries Expense

Debit Salaries Expense; Credit Salaries Payable

Debit Salaries Expense; Credit Cash

Debit Cash; Credit Salaries Expense

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Verified step by step guidance

Understand the concept of accrual accounting: Accrual accounting requires that expenses be recognized in the period they are incurred, regardless of when payment is made. Salaries earned by employees but not yet paid must be recorded as an expense for the current period.

Identify the accounts involved: Salaries Expense represents the cost of salaries incurred during the period, and Salaries Payable represents the liability for salaries owed but not yet paid.

Determine the correct adjusting entry: To record the salaries earned but unpaid, you need to increase (debit) Salaries Expense to reflect the cost incurred and increase (credit) Salaries Payable to recognize the liability.

Avoid common mistakes: Do not debit Salaries Payable or Cash, as these actions would incorrectly reduce liabilities or assets. Similarly, do not credit Salaries Expense, as this would reduce the expense instead of increasing it.

Write the journal entry: The correct adjusting entry is: Debit Salaries Expense; Credit Salaries Payable. This ensures that the expense is recognized in the current period and the liability is properly recorded.