Assume that the City of Juneau maintains its books and records to facilitate the preparation of its fund financial statements.The city pays its employees bi-weekly on Friday.The fiscal year ended on Wednesday, June 30.Employees had been paid on Friday, June 25.The employees paid from the general fund had earned $90,000 on Monday, Tuesday, and Wednesday (June 28, 29, and 30).What entry, if any, should be made in the city's general fund on June 30?
A)Debit Expenditures $90,000; credit Wages and salaries payable $90,000.
B)Debit Expenses $90,000; credit Wages and salaries payable $90,000.
C)Debit Expenditures $90,000; credit Encumbrances $90,000.
D)No entry is required.

Question

Quizplus · Accepted Answer

Since the employees had earned $90,000 before the end of the fiscal year, but had not yet been paid, the city should record this as an expenditure and credit Wages and salaries payable. Therefore, the correct entry to be made in the city's general fund on June 30 is debit Expenditures $90,000 and credit Wages and salaries payable $90,000. Choice A correctly reflects this entry. Choice B is incorrect because the term Expenses is not used in governmental accounting. Choice C is also incorrect because Encumbrances apply to future expenditures and not past expenditures. Choice D is incorrect because an entry is necessary to record the wages earned but not yet paid.

Assume That the City of Juneau Maintains Its Books and Records