The journal entry a company uses to record accrued vacation privileges for its employees at the end of the year is
A) debit Vacation Pay Expense; credit Vacation Pay Payable
B) debit Vacation Pay Payable; credit Vacation Pay Expense
C) debit Salary Expense; credit Cash
D) debit Salary Expense; credit Salaries Payable

Question

Quizplus · Accepted Answer

Accrued vacation privileges represent an amount owed by the company to its employees for vacation time they have earned but not yet taken. This amount is recorded as an expense in the current period and as a liability that will be paid in the future. Therefore, the correct journal entry to record accrued vacation pay at the end of the year is to debit Vacation Pay Expense and credit Vacation Pay Payable. Choice B is incorrect because it would increase the expense account and decrease the liability account, which is the opposite of what should happen. Choice C is incorrect because it represents a regular salary payment, while vacation pay is a separate expense. Choice D is incorrect because it is also related to regular salary payments and does not address the specific issue of accrued vacation pay.

The Journal Entry a Company Uses to Record Accrued Vacation