Vacation pay is charged properly as an expense in the month in which the employee takes a vacation.

Question

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Vacation pay is typically accrued as a liability throughout the year as employees earn the right to take time off. Then, when an employee actually takes a vacation, the accrued liability is reduced and the corresponding expense is recognized in the month in which the employee earned the vacation time. It is not recognized as an expense in the month in which the employee takes a vacation.

Vacation Pay Is Charged Properly as an Expense in the Month