The employees of Able Company have worked the last two weeks of 2016,but the employees' wages have not been paid or recorded as of December 31,2016.The adjusting entry that Able should make for these unpaid wages on December 31,2016 is:
A)debit to Wages Expense and credit to Cash.
B)debit to Wages Expense and credit to Wages Payable.
C)debit to Wages Payable and credit to Wages Expense.
D)no entry is required until the employee is paid next period.

Question

Quizplus · Accepted Answer

The unpaid wages are a liability for the company as they owe money to their employees. Therefore, the appropriate adjusting entry for Able Company would be to debit Wages Expense (an income statement account) and credit Wages Payable (a liability account) on December 31, 2016. This entry recognizes the expense and liability, which will be paid in a future period. Option A is incorrect because it credits Cash, which hasn't been paid yet. Option C is the opposite of B, which would have increased the expense in the current period. Option D is incorrect because an adjusting entry is necessary to reflect the actual financial position of the company at year-end.

The Employees of Able Company Have Worked the Last Two