During A Recent Week, Incurred Wages Were 700, But 280 Of

During A Recent Week Incurred Wages Were 700 However 280 Of

During a recent week, incurred wages were $700. However, $280 of the wages hadn't been paid. The adjusting entry for wages would be: A. debit wages expense, $420; credit wages payable, $420. B. debit wages payable, $420; credit wages expense, $420. C. debit wages expense, $280; credit wages payable, $280. D. debit wages payable, $280; credit wages expense, $280.

Paper For Above instruction

In the realm of financial accounting, accurate recognition of expenses and liabilities is crucial for presenting a truthful picture of a company's financial position. The scenario of incurred wages that remain unpaid exemplifies the importance of adjusting entries at the end of an accounting period. When wages are incurred but not paid, the accountant must recognize the wages expense in the period in which the work was performed, not necessarily when payment is made. This follows the matching principle, which aims to associate expenses with the revenues they help generate within the same period.

In this specific case, wages of $700 were incurred during the week. Out of this, $280 of wages had not yet been paid, which indicates an obligation owed to employees that is still outstanding. To record this accurately, an adjusting entry is necessary. The correct approach involves increasing wages expense to reflect the cost of wages incurred during the period, and increasing wages payable to recognize the company's liability. Therefore, the appropriate journal entry would be a debit to wages expense for $420 (the portion of wages paid) and a credit to wages payable for $420 (the unpaid wages).

Choosing the correct answer from the options provided aligns with this accounting principle. Option A states: "debit wages expense, $420; credit wages payable, $420," which matches the proper adjustment. This ensures the expenses are correctly reflected in the income statement, and liabilities are properly recognized on the balance sheet. It is important to note that the wages incurred but unpaid ($280) need to be accrued, and the portion of wages paid ($420) should be reflected as an expense for the period.

Accurate adjusting entries help in adhering to Generally Accepted Accounting Principles (GAAP) that emphasize reliability and consistency in financial reporting. They prevent the understatement or overstatement of expenses and liabilities, which could mislead stakeholders or result in non-compliance with regulatory standards. Without such adjustments, the financial statements would not provide a true and fair view of the company's operational results or financial position.

In conclusion, recognizing incurred but unpaid wages involves recording the wages expense that relates to the period and acknowledging the liability through wages payable. The appropriate journal entry to reflect this scenario is A: debit wages expense, $420; credit wages payable, $420.

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