Multiple Choice
Which of the following types of receivables are typically charged directly to the income statement when determined to be uncollectible?
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7. Receivables and Investments
Types of Receivables
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Which of the following best describes the Salaries Payable account?
A
It is a liability account representing amounts owed to employees for work performed but not yet paid.
B
It is an expense account recording the cost of salaries paid during the period.
C
It is an asset account representing amounts to be received from customers.
D
It is a contra-asset account used to estimate uncollectible receivables.
Verified step by step guidance1
Step 1: Understand the nature of the Salaries Payable account. Salaries Payable is an account used in financial accounting to record amounts owed to employees for work they have completed but have not yet been paid for. This makes it a liability account.
Step 2: Eliminate incorrect options by analyzing their definitions. For example, an expense account records costs incurred during a period, such as salaries paid, but Salaries Payable does not record payments—it records obligations.
Step 3: Recognize that Salaries Payable is not an asset account. Asset accounts represent resources owned by the company, such as cash or receivables, which is not the case here.
Step 4: Understand that Salaries Payable is not a contra-asset account. Contra-asset accounts, like Allowance for Doubtful Accounts, are used to offset asset accounts, which is unrelated to Salaries Payable.
Step 5: Conclude that the correct description of Salaries Payable is: 'It is a liability account representing amounts owed to employees for work performed but not yet paid.' This aligns with the definition of a liability in financial accounting.
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