The trial balance showed wages, ₦2,500 and a note stated that ₦500 wages were due but unpaid. When preparing final accounts and balance sheet, it is required to debit profit and loss account with ____
Take Free Practice Test On 2026 JAMB UTME, Post UTME, WAEC SSCE, GCE, NECO SSCE
Correct Answer: Option A
Explanation:
When preparing the final accounts and the balance sheet, we need to account for wages that have been accrued but not yet paid. In this case, the trial balance shows ₦2,500 wages, but the note mentions that ₦500 wages are due but unpaid.
Wages in the Trial Balance:
The ₦2,500 in the trial balance represents the wages already paid and recorded by the business.
Accrued Wages:
Since ₦500 of the wages are due but unpaid, this amount must be accrued (i.e., recorded as an expense even though it hasn’t been paid yet). This reflects the wages the business owes to its employees for work already performed.
Adjusting the Profit and Loss Account: To reflect the total wage expense for the period, the ₦500 of unpaid wages needs to be added to the ₦2,500 already recorded in the trial balance. This means the total wage expense to be charged to the Profit and Loss Account is ₦3,000.
Balance Sheet Adjustment (Accrued Wages): The ₦500 of wages that are owed but not paid yet is considered an accrued liability. This amount will be shown under current liabilities in the balance sheet to represent the obligation to pay employees.
When preparing the final accounts and the balance sheet, we need to account for wages that have been accrued but not yet paid. In this case, the trial balance shows ₦2,500 wages, but the note mentions that ₦500 wages are due but unpaid.
Wages in the Trial Balance:
The ₦2,500 in the trial balance represents the wages already paid and recorded by the business.
Accrued Wages:
Since ₦500 of the wages are due but unpaid, this amount must be accrued (i.e., recorded as an expense even though it hasn’t been paid yet). This reflects the wages the business owes to its employees for work already performed.
Adjusting the Profit and Loss Account: To reflect the total wage expense for the period, the ₦500 of unpaid wages needs to be added to the ₦2,500 already recorded in the trial balance. This means the total wage expense to be charged to the Profit and Loss Account is ₦3,000.
Balance Sheet Adjustment (Accrued Wages): The ₦500 of wages that are owed but not paid yet is considered an accrued liability. This amount will be shown under current liabilities in the balance sheet to represent the obligation to pay employees.