What is the adjusting entry for accrued wages?

What is the adjusting entry for accrued wages?

• A. Debit Salaries Expense; Credit Salaries Payable.
• B. Debit Salaries Payable; Credit Salaries Expense.
• C. Debit Wages Receivable; Credit Wages Revenue.
• D. Debit Cash; Credit Salaries Expense.

Answer: (A)

Wages accrued are wages earned by employees but not yet paid at period end. To reflect this in accrual accounting, you must recognize the expense for the period and set up a liability for what you owe. The adjusting entry is to debit Salaries Expense to record the labor cost incurred, and credit Salaries Payable to show the obligation to pay employees later. This increases the period’s expenses (lowering net income) and increases current liabilities on the balance sheet. When wages are actually paid, you would then debit Salaries Payable and credit Cash to settle the obligation. The other options either reverse the effects, use revenue or receivable accounts that don’t fit wages, or involve cash in the wrong direction.

Wages accrued are wages earned by employees but not yet paid at period end. To reflect this in accrual accounting, you must recognize the expense for the period and set up a liability for what you owe. The adjusting entry is to debit Salaries Expense to record the labor cost incurred, and credit Salaries Payable to show the obligation to pay employees later. This increases the period’s expenses (lowering net income) and increases current liabilities on the balance sheet. When wages are actually paid, you would then debit Salaries Payable and credit Cash to settle the obligation. The other options either reverse the effects, use revenue or receivable accounts that don’t fit wages, or involve cash in the wrong direction.