Basic accounting question...?
Basic accounting question...?
In basic accounting, is "salary and wage expense" considered a liability of a business in the same way "accounts payable" are?
Answers:
ash 7: yes
2006-09-13 11:19:38
2006-09-13 11:19:38
green eyes: it's considered an expense.
2006-09-13 11:20:17
2006-09-13 11:20:17
CheeseyGriller: Yes
2006-09-13 11:21:38
2006-09-13 11:21:38
Traci CC: Yes, because it's money going out of your assets.
2006-09-13 11:25:22
2006-09-13 11:25:22
Cayman_tac: Yes, anything that you pay out is considered a liability.
2006-09-13 11:28:25
2006-09-13 11:28:25
mpoundit: No. Salary and Wage expense is a Profit and Loss item where as Accounts Payable are a Balance Sheet Item.
2006-09-13 11:29:59
2006-09-13 11:29:59
someone: No, Salaries & wages are 'expenses' not 'liabilities' of your business.
In accounting, the amount that is 'spent' or that is 'due but not spent' [explained further down] towards running your business is an 'Expense'.
'Liability' on the other hand is the amount which the business owes to somebody. Thus salaries are always your 'expense' & if such salaries & wages are UNPAID it will also be shown as your liabilities until you pay it off.
I'll try to explain the relation between these two, taking your particular question :
Imagine in a case, When the salary of August is due to be paid on the 31st but is actually paid only on the 5th of the next month [ ie.case of 'due but not spent' ].
Then accounting entries are to be passed both on 31st Aug & on 5th Sept.
On 31st August an accounting entry has to be passed on to make sure of 2 things;
(1) that salary 'EXPENSE' of august is accounted in August & (2) to show that as on 31 August the company is 'LIABLE' to pay that amount to somebody.
This entry simultaneously INCREASING your 'salary expense account' & your 'salary payable liability account'.Thus Showing salary as a business expense & also as a business liability since it is still unpaid.
On 5th Sept when salary is actually paid another entry is passed, which shows cash flowing out & also DECREASING your 'salary payable account' liability.
Hope i have not ended up confusing you more than ever....
2006-09-13 12:16:20
2006-09-13 12:16:20
dino: NO
Salary and wage expense are a profit and loss sheet item. A/P is a balance sheet item. So, no, expenses are the way you reduce a liability.
2006-09-13 12:34:07
2006-09-13 12:34:07
Chosen Answer
Jordan K: Why do people answer with their opinion, but make it sound like a fact, especially when they are totally wrong. It is an expense. A liability is something that is owed. It is possible to owe money to your employees (they worked this week, but have not yet been paid). In this case, there is salary expense and salary payable. When the employees get paid, the payable goes away.
2006-09-14 10:35:38
Jordan K: Why do people answer with their opinion, but make it sound like a fact, especially when they are totally wrong. It is an expense. A liability is something that is owed. It is possible to owe money to your employees (they worked this week, but have not yet been paid). In this case, there is salary expense and salary payable. When the employees get paid, the payable goes away.
2006-09-14 10:35:38