A business pays weekly salaries of $25,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is
A) debit Salaries Payable, $10,000; credit Cash, $10,000
B) debit Salary Expense, $10,000; credit Drawing, $10,000
C) debit Salary Expense, $10,000; credit Salaries Payable, $10,000
D) debit Drawing, $10,000; credit Cash, $10,000

Question

Quizplus · Accepted Answer

Since the fiscal period ends on Tuesday, there will be 2 days of salaries (Wednesday and Thursday) that have been earned but not paid. Therefore, an adjusting entry needs to be made to record the expenses that have been incurred but not yet paid. The necessary adjusting entry is to debit Salary Expense (to increase the expense) and credit Salaries Payable (a liability account that represents the amount owed to employees but not yet paid) for $10,000 each. This entry recognizes the expense that was earned during the period but not yet paid.

A Business Pays Weekly Salaries of $25,000 on Friday for a Five-Day