Accrued payroll is a current liability consisting of salaries and wages currently owed.

Accrued payroll is a current liability consisting of salaries and wages currently owed.

• A. It is a current asset
• B. It is a long-term asset
• C. It is a current liability consisting of salaries and wages currently owed
• D. It is a revenue

Answer: (C)

Accrued payroll reflects wages earned by employees but not yet paid. Because you owe this amount to employees, it creates a liability on the balance sheet, specifically a current liability since it’s typically settled within the next year or operating cycle. This is a classic case of recognizing an expense in the period in which the work was performed while recording the corresponding obligation to pay. The typical adjusting entry debits the wage expense for the period and credits the payable account (salaries and wages payable). When you actually pay, you would debit the payable and credit cash, reducing both. It isn’t an asset because you don’t own something of value; it isn’t revenue because it doesn’t represent income.

Accrued payroll reflects wages earned by employees but not yet paid. Because you owe this amount to employees, it creates a liability on the balance sheet, specifically a current liability since it’s typically settled within the next year or operating cycle. This is a classic case of recognizing an expense in the period in which the work was performed while recording the corresponding obligation to pay. The typical adjusting entry debits the wage expense for the period and credits the payable account (salaries and wages payable). When you actually pay, you would debit the payable and credit cash, reducing both. It isn’t an asset because you don’t own something of value; it isn’t revenue because it doesn’t represent income.