yang company recognized accrued salary expense. the recognition will affect which of the following financial statements?
yang company recognized accrued salary expense. the recognition will affect which of the following financial statements?
Answer: The recognition of accrued salary expense by Yang Company will affect the following financial statements:
-
Income Statement (Profit and Loss Statement): The recognition of accrued salary expense will be recorded as an expense on the income statement. This will reduce the company’s net income for the period in which the expense is recognized, as it reflects the cost of salaries that have been earned by employees but not yet paid.
-
Balance Sheet: On the balance sheet, two accounts will be impacted:
- Liabilities: Accrued salary expense will appear as a current liability on the balance sheet until it is paid. This represents the obligation to pay employees in the future.
- Equity (Retained Earnings): The reduction in net income on the income statement will also reduce retained earnings, which is part of the equity section on the balance sheet.
So, the recognition of accrued salary expense affects both the income statement and the balance sheet of Yang Company.