Multiple Choice
Which of the following best describes the adjusting entry for underapplied overhead at the end of an accounting period?
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3. Accrual Accounting Concepts
Adjusting Entries: Accrued Expenses
Multiple Choice
The adjusting entry for amounts a company is obligated to pay an employee in the future affects which of the following accounts?
A
Prepaid Expenses and Salaries Payable
B
Cash and Salaries Expense
C
Salaries Payable and Accounts Receivable
D
Salaries Expense and Salaries Payable
Verified step by step guidance1
Understand the concept of adjusting entries: Adjusting entries are made at the end of an accounting period to ensure that revenues and expenses are recorded in the period they are incurred, regardless of when cash is received or paid.
Identify the nature of the obligation: The company is obligated to pay an employee in the future, which means this is an accrued expense. Accrued expenses are liabilities that have been incurred but not yet paid.
Determine the accounts affected: Since the company owes salaries to employees, the liability account 'Salaries Payable' will increase. Additionally, the expense account 'Salaries Expense' will be recorded to reflect the cost incurred during the period.
Understand the journal entry: The adjusting entry will debit 'Salaries Expense' to recognize the expense and credit 'Salaries Payable' to record the liability.
Review the correct answer: Based on the explanation, the accounts affected are 'Salaries Expense' and 'Salaries Payable,' which matches the correct answer provided in the problem.
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