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ACCA Applied Knowledge · Financial Accounting · Accrued expenses (accruals), prepaid expenses (prepayments), accrued income and deferred income

Dalton Co's trial balance shows a wages expense of $48,000. Staff wages for the final week, $1,500, were paid in the following month. In addition, $2,000 of the amount in the wages account was an advance paid to staff for January of next year. What is the wages expense for the year?

The wages expense is $47,500. Add the $1,500 accrued for unpaid wages to the $48,000 ledger balance, then deduct the $2,000 advance prepaid for next year, since it belongs to the following period.

  1. A$47,500Correct
  2. B$44,500
  3. C$52,000
  4. D$45,000

Explanation

Start with $48,000. Add the accrual of $1,500 for unpaid wages: 49,500. Deduct the $2,000 advance relating to next year: 47,500. Ignoring the advance gives $49,500; deducting the accrual gives $44,500, both wrong.

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