The correct adjusting entry to accrued unpaid employee salaries of $9,000 on December 31 is:
A)debit Salary Expense, $9,000; credit Cash, $9,000
B)debit Salary Expense, $9,000; credit Fees Earned, $9,000
C)debit Salary Expense, $9,000; credit Prepaid Salary, $9,000
D)debit Salary Expense, $9,000; credit Salaries Payable, $9,000
E)debit Salaries Payable, $9,000; credit Salary Expense $9,000

Question

Quizplus · Accepted Answer

Accrued unpaid employee salaries on December 31 is an expense that needs to be recognized in the current period. The adjusting entry for this is to debit Salary Expense and credit Salaries Payable. This records the expense and the corresponding liability on the balance sheet for the amount owed to employees. Option A records a payment of cash which does not reflect the accrual accounting principle. Option B records the expense to another account, Fees Earned, which is incorrect. Option C records the expense as a prepaid asset which is not appropriate since the expense has already been incurred. Option E records the transaction in reverse, which is not the correct way to record accrued salaries.

The Correct Adjusting Entry to Accrued Unpaid Employee Salaries of $9,000