An adjusting entry recorded June salary expense that will be paid in July. Which statement best describes the effect of this adjusting entry on the company’s accounting equation?a. Assets are not affected, liabilities are increased, and stockholders’ equity is decreased.b. Assets are not affected, liabilities are increased, and stockholders’ equity is increased.c. Assets are decreased, liabilities are not affected, and stockholders’ equity is decreased.d. Assets are decreased, liabilities are increased, and stockholders’ equity is decreased.

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Payroll Entries

Payroll is a comprehensive record of employees that are paid by the company. Payroll classifies employees into various categories according to their function and pays scale (basic wage, allowance, income tax, other taxes, employee loans, etc.). Payroll processes form the bedrock of every organization as it contains sensitive information on the ‘wage and paycheck’ portion of the company’s strength—its employees. The organization needs to keep a track of the employees currently on the payroll, the net payout for the company, the record of transactions related to the employees including deductions and payroll taxes to identify the liability and its effect on the balance sheet (and other financial statements). Payroll records also include qualitative factors such as the conduct of the employee.