During the first year of operations, employees earned vacation pay of $50,000.The vacations will be taken during the second year.The vacation pay expense should be recorded in the first year of operations.

Question

Quizplus · Accepted Answer

Vacation pay expense should be recorded in the year the employees earned it, which is the first year of operations. This is known as the accrual method of accounting.

During the First Year of Operations, Employees Earned Vacation Pay