Sick pay benefits that are related to an employee's services already rendered, whose payment is probable and the amount reasonably estimated, must be accrued and recognized as a current liability if the obligation relates to rights that $\begin{array}{lll}
&\text { Accumulate }& \text {Vest}\
\text { I. } & \text { No } & \text { No } \
\text { II. } & \text { No } & \text { Yes } \
\text { III. } & \text { Yes } & \text { No } \
\text { IV } & \text { Yes } & \text { Yes }
\end{array}$

Question

Quizplus · Accepted Answer

This question is referring to the accounting principle of accruals. According to this principle, expenses must be recognized in the accounting period in which they are incurred, regardless of when payment is made. In the case of sick pay benefits, if an employee has already rendered their services (i.e. worked) and is entitled to sick pay as a result of sickness or injury, the obligation to pay this benefit has already arisen. Therefore, the benefit must be accrued as a liability in the current period. Choice B correctly identifies this principle and is the best answer. Choices A, C, and D are not relevant to the concept of accruals.

Sick Pay Benefits That Are Related to an Employee's Services