What is the accrued expenses accounting treatment for the account of wages payable?
Answer
An originating entry to record wage expense and the corresponding liability for wages payable.
A future adjusting entry to eliminate the liabilitydecreasing wages payable and asset accountdecreasing cash.
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Parent (intermediate) annotation
Open it lustration, the company had incurred wage expenses at month end, but the payment would not be made until after the end of the month (Transaction 11). To reflect the company’s position at the end of the month, the accounting treatment involved <span>an originating entry to record wage expense and the corresponding liability for wages payable, and a future adjusting entry to eliminate the liability when cash is paid (not shown because wages will be paid only in February). Similarly, the IAL illustration included interest accrual on the company’s bank borrowing. (See the boxes showing the accounting treatment of Transaction 8, where Transaction 8 refers
Original toplevel document
Open it ved and the corresponding liability to deliver newsletters) and, subsequently, 12 future adjusting entries, the first one of which was illustrated as Transaction 12. Each adjusting entry reduces the liability and records revenue.
<span>In practice, a large amount of unearned revenue may cause some concern about a company’s ability to deliver on this future commitment. Conversely, a positive aspect is that increases in unearned revenue are an indicator of future revenues. For example, a large liability on the balance sheet of an airline relates to cash received for future airline travel. Revenue will be recognized as the travel occurs, so an increase in this liability is an indicator of future increases in revenue.
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