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  • Jan 24, 2007, 05:57 PM
    swthrt
    Assets & Liabilities
    Would employee wages be an example of a decrease of an asset and a decrease of a liability? If so what would be the journal entry?

    Thanks.
  • Jan 24, 2007, 06:25 PM
    jeffp
    Quote:

    Originally Posted by swthrt
    Would employee wages be an example of a decrease of an asset and a decrease of a liability? If so what would be the journal entry?

    Thanks.


    The only way I can see it being just those 2 is to decrease cash ( an asset) and also decrease accrued salaries/ payroll (a liability) Assuming that the wages had been accrued.

    Perhaps someone else reads more into this than I do
  • Jan 24, 2007, 09:36 PM
    CaptainForest
    Scenario 1:
    Let's say your employees have worked for you for 2 weeks and now you must pay them $400 that you owe them.

    The JE would be:
    Dr. Wages Expense 400 (increasing an expense)
    Cr. Cash 400 (decreasing an asset).


    Scenario 2:
    Let's say you owe your employees the same $400. However you must prepare your financial statements today, and are not paying them until next week.

    Your JE would be:
    Dr. Wages Expense 400 (increasing an expense)
    Cr. Wages Payable 400 (increasing a liability).

    Next week when you pay them, your JE would be:
    Dr. Wages Payable 400 (decreasing a liability)
    Cr. Cash 400 (decreasing an asset)

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