Asked by Lauren Walsh on Jul 05, 2024
Verified
The procedure for a payroll accrual requires identifying the portion of the payroll that falls after the payday but within the accounting period, and:
A) paying employees that amount.
B) recording the amount as an unusual cost.
C) providing for both the expense and the liability for the unpaid payroll with an accrual entry when the books a closed.
D) preparing a supporting note on the financial statement as to the amount of the unpaid payroll.
Payroll Accrual
An accounting method that records payroll expenses incurred but not yet paid out to employees, ensuring expenses are recognized in the period they are incurred.
Accounting Period
The span of time covered by financial statements, often a quarter or year, reflecting the company's financial performance and position.
Accrual Entry
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
- Comprehend the process of payroll accrual and its significance in financial accounting.
Verified Answer
HM
Haile McDonaldJul 09, 2024
Final Answer :
C
Explanation :
The procedure for a payroll accrual requires creating an accrual entry that provides for both the expense and the liability for the unpaid payroll. This ensures that the financial statements accurately reflect the amount of payroll that has been earned but not yet paid out. Option A is incorrect because paying employees would be a cash disbursement and not part of the accrual process. Option B is incorrect because payroll is a normal, recurring cost and not unusual. Option D is incorrect because supporting notes do not replace the need for an accrual entry in the accounting records.
Learning Objectives
- Comprehend the process of payroll accrual and its significance in financial accounting.