The trial balance showed wages, N2,500 and a note stated that N500 wages were due but unpaid. When preparing final accounts and balance sheet, it is required to debit profit and loss account with ___________
A. N3,000 and show wages accrued N500 in the balance sheet B. N2,000 and show ages accrued N500 in the balanced sheet C. N3,000 and show wages prepaid N500 in the balance sheet D. N2,000 and show wages paid in advance \(N 500\) in the balance sheet
Correct Answer: A
Explanation
Correct Answer: A. N3,000 and show wages accrued N500 in the balance sheet
The trial balance shows wages of N2,500. However, there is an additional N500 of wages that have been incurred but not yet paid, which represents an accrued expense.
When preparing the final accounts: - The Profit and Loss Account should be debited with the total expense incurred during the period, which is N2,500 (already recorded) + N500 (accrued but unpaid), totaling N3,000. - On the Balance Sheet, the accrued wages of N500 should be shown as a liability under "wages accrued" because it represents an amount that the organization owes but has not yet paid.
The other options do not correctly reflect the situation: - B. N2,000 is incorrect because the total wages expense is N3,000. - C. N3,000 with wages prepaid N500 is incorrect because the N500 is not a prepaid expense; it's an accrued expense. - D. N2,000 with wages paid in advance is incorrect as well since the N500 represents an amount owed, not an advance payment.
