Q27. Salaries payable
Entity A pays salaries on the 20th of each month. Monthly salaries expense is $180,000. On December 20, 20×1, Entity A paid $180,000 in cash for monthly salaries.
What are the journal entries to be prepared on December 20 and 31, 20×1?
A27. Salaries expense is recorded on the debit side. Salaries payable is recorded on the credit side.
(1) December 20, 20×1: to record the payment of monthly salaries
| Debit | Credit | |
| Salaries expense | 180,000 | |
| Cash | 180,000 |
(2) December 31, 20×1: to accrue salaries expense for the period from December 21 to December 31, 20×1
| Debit | Credit | |
| Salaries expense | 60,000 | |
| Salaries payable | 60,000 |
[Note]
1. Increase in salaries expense (expense): debit
2. Increase in salaries payable (liability): credit
3. Salaries for the period from December 21 to December 31
= $180,000 x 1/3 = $60,000
[Exercise]
Entity B hired one employee on December 11, 20×1. The first salary will be paid on January 10, 20×2. Monthly salary is $6,000.
(1) December 31, 20×1: to accrue salaries expense for the period from December 11 to December 31, 20×1
| Debit | Credit | |
| Salaries expense | 4,000 | |
| Salaries payable | 4,000 |
[Note]
1. Increase in salaries expense (expense): debit
2. Increase in salaries payable (liability): credit
3. Salaries expense for the period from December 11 to December 31, 20×1
= $6,000 x 2/3 = $4,000
(2) January 10, 20×2: to record the cash payment of $6,000 monthly salary
| Debit | Credit | |
| Salaries payable | 4,000 | |
| Salaries expense | 2,000 | |
| Cash | 6,000 |
[Note]
1. Decrease in salaries payable (liability): debit
2. Increase in salaries expense (expense): debit
3. Decrease in cash (asset): credit
4. Salaries expense for the period from January 1 to January 10, 20×2
= $6,000 x 1/3 = $2,000
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