If a ﬁrm accrues the payroll due but not paid at the end of a ﬁnancial period, what should it do on the ﬁrst day of the next ﬁnancial period?
A) It should create a reminder about the accrual to ensure accuracy of computations on the next pay date.
B) It should make a note to create the reversing entry at the end of the next ﬁnancial period.
C) It should disburse the accrued pay to the employees.
D) It should create a reversing entry in the General Journal.

Question

Quizplus · Accepted Answer

A reversing entry is made to cancel out the accrual entry from the previous period, simplifying the recording of the actual payroll payment.

If a ﬁRm Accrues the Payroll Due but Not Paid