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 Accrued wages and salary $90,000.
B) Debit Expenses $90,000; credit Accrued wages and salary $90,000.
C) Debit Expenditures $90,000; credit Encumbrances $90,000.
D) Debit Expenses $90,000; credit Encumbrances $90,000.

Question

Quizplus · Accepted Answer

In governmental accounting, particularly within the general fund, the correct term for recognizing the consumption of resources is "expenditures," not "expenses." Therefore, to account for wages that have been earned but not yet paid, the entry should debit Expenditures and credit Accrued wages and salary. This reflects the obligation to pay the employees for the last three days of the fiscal year.

Assume That the City of Juneau Maintains Its Books and Records