Javier needs to add month-end accruals for salaries that have been earned by employees but not yet paid. Which of the following adjusting entries should he record?

• A. Debit Salaries Payable; Credit Salaries Expense
• B. Debit Salaries Expense; Credit Salaries Payable
• C. Debit Salaries Expense; Credit Cash
• D. Debit Cash; Credit Salaries Expense

Answer: (B)

Verified step by step guidance

1. Understand the concept of accrual accounting: Accrual accounting requires that expenses be recognized in the period they are incurred, regardless of when payment is made. Salaries earned by employees but not yet paid must be recorded as an expense for the current period.
2. Identify the accounts involved: Salaries Expense represents the cost of salaries incurred during the period, and Salaries Payable represents the liability for salaries owed but not yet paid.
3. Determine the correct adjusting entry: To record the salaries earned but unpaid, you need to increase (debit) Salaries Expense to reflect the cost incurred and increase (credit) Salaries Payable to recognize the liability.
4. Avoid common mistakes: Do not debit Salaries Payable or Cash, as these actions would incorrectly reduce liabilities or assets. Similarly, do not credit Salaries Expense, as this would reduce the expense instead of increasing it.
5. Write the journal entry: The correct adjusting entry is: Debit Salaries Expense; Credit Salaries Payable. This ensures that the expense is recognized in the current period and the liability is properly recorded.