Prior to adjustment at August 31, Salary Expense has a debit balance of $307,100. Salaries owed but not paid as of the same date total $2,010. Present the entries to record the following: 1. Accrued salaries as of August 31. If an amount box does not require an entry, leave it blank. 2. The effect of closing of Salary Expense as of August 31. If an amount box does not require an entry, leave it blank.

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Business

Allen Hoover

25 May, 08:35

Prior to adjustment at August 31, Salary Expense has a debit balance of $307,100. Salaries owed but not paid as of the same date total $2,010. Present the entries to record the following: 1. Accrued salaries as of August 31. If an amount box does not require an entry, leave it blank. 2. The effect of closing of Salary Expense as of August 31. If an amount box does not require an entry, leave it blank.

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Chance · Answer 1

1) To record accrued salaries:

Debit Salaries Account with $2,010

Credit Salaries in Arrears Account (Salaries Payable) with $2,010

Being the accrued salaries not paid as at August 31

2) The effect of closing Salary Expense at August 31:

Debit Income Statement with $309,110

Credit Salaries Account with $309,110

Being the account closing to Income Statement.

These entries closes the salary account and transfers the expense to the income statement.

Explanation:

a) Accrued salaries represent a liability to the company, which will be subsequently settled. To recognise the liability, a Payable or Accrued Account is opened.

This account recognises that an expense that was due had not been settled in the period to which the expense matches. It acknowledges that a service had been received, but the cash settlement will be carried out later.

b) In the income statement for August, the total salary expense is recognised as cost of hiring employees. The outstanding balance of $2,010 will also be showed as a current liability in the balance sheet.