The correct adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31 is:
A) debit Salary Expense, $9,000; credit Cash, $9,000
B) debit Salary Expense, $9,000; credit Fees Earned, $9,000
C) debit Salary Expense, $9,000; credit Salaries Payable, $9,000
D) debit Salary Expense, $9,000; credit Prepaid Salary, $9,000
E) debit Salaries Payable, $9,000; credit Salary Expense $9,000

Question

Quizplus · Accepted Answer

Accrued and unpaid employee salaries represent amounts that the company owes to employees at the end of the accounting period. To reflect this, the company needs to recognize the expense (salary expense) and the liability (salaries payable) using an adjusting entry.

Option A is incorrect because it doesn't include the creation of a liability account (salaries payable) to reflect the company's obligation to pay salaries.

Option B is incorrect because Fees Earned is a revenue account, and there is no connection between accrued employee salaries and revenue.

Option D is incorrect because Prepaid Salary suggests that the company has paid the salaries in advance, which is not the case here.

Option E is incorrect because it reverses the debit and credit accounts. The salary expense should be debited to reflect the increase in expenses, while the salaries payable account should be credited to reflect the increase in liabilities.

The Correct Adjusting Entry for Accrued and Unpaid Employee Salaries