Employee vacation benefits:
A) Are estimated liabilities.
B) Are contingent liabilities.
C) Are recorded as an expense when the employee takes a vacation.
D) Are recorded as an expense when the employee retires.
E) Increase net income.

Question

Quizplus · Accepted Answer

Employee vacation benefits are estimated liabilities, which means they are recorded on the balance sheet as an obligation owed by the company to its employees. They are not recorded as an expense until the employee takes a vacation, at which point they become an actual liability and are expensed. Employee vacation benefits do not increase net income; they decrease it by increasing expenses.

Employee Vacation Benefits