What effect do payroll entries have on a ﬁrm's accounting system?
A)They reduce the ﬁrm's liabilities.
B)They increase the ﬁrm's assets.
C)They increase the owners' equity.
D)They increase the ﬁrm's expenses.

Question

Quizplus · Accepted Answer

Payroll entries typically increase a firm's expenses because they represent the cost of labor, which is an expense to the company. This reduces net income and, consequently, owners' equity, but it does not directly increase assets or decrease liabilities upon the recording of the expense itself.

What Effect Do Payroll Entries Have on a ﬁRm's Accounting