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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Determining wages paid

The wages payable and wages expense accounts at May 31, after adjusting entries have been posted at the end of the first month of operations, are shown in the following T accounts:

Chapter 3, Problem 3.14EX, Determining wages paid The wages payable and wages expense accounts at May 31, after adjusting

Determine the amount of wages paid during the month.

To determine

Accruals:

Accruals refer to the revenues that are generated from goods delivered or, service performed to the customer, but cash is not yet received from the customer, and the expenses are incurred, but cash is not yet paid.

Accruals are classified into two types.  They are accrued revenues, and accrued expenses.

Accrued revenues: Revenues are generated but not yet received in cash.

Accrued expenses: Expenses are incurred but not yet paid in cash.

The expense recognition principle:

The expense recognition principle refers to the expenses that should match with revenue (matching principle) in the period when the company incurred expenses in order to generate the revenue, doesn’t matter, payment is made or not.

To calculate: The amount of wages paid during the May month.

Explanation

The business records the wages expense on the basis of the expense recognition principle, and wages expense recognized at the end of the May month (accrued expense). In this case, the wages paid in cash during the month can calculated by the difference between the wages expense and...

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