Aussie Marketing employs five (5) full-time staff who are each paid $2,000 per week. Their employment contract entitles them to four (4) weeks of annual leave each year, which the business records on a weekly basis.[Fill in the blank]匹配题
A
Increase
B
Decrease

Question

Aussie Marketing employs five (5) full-time staff who are each paid $2,000 per week. Their employment contract entitles them to four (4) weeks of annual leave each year, which the business records on a weekly basis.[Fill in the blank]匹配题

A

Increase

B

Decrease

BlackTom AI · Accepted Answer

Annual leave accrual increases both the wage expense and the liability (provision) under accrual accounting.

1) Relevant concepts
- Accrual accounting and the matching principle: expense is recognised as it is incurred, not only when paid.  
- A provision for annual leave is a liability representing amounts the employer owes for leave earned but not yet taken.  
- The weekly journal entry will debit an expense and credit a provision (liability).

2) Step-by-step reasoning and calculations
- Each employee is paid $2,000 per week and is entitled to 4 weeks’ annual leave per year.  
- Annual leave cost per employee per year = 4 weeks × $2,000 = $8,000.  
- Spread over 52 weeks, weekly accrual per employee = $8,000 ÷ 52 = $153.8461538 (≈ $153.85).  (Intermediate step shown: 4/52 = 0.076923; 0.076923 × $2,000 = $153.8461538.)
- For five employees: weekly accrual total = 5 × $153.8461538 = $769.230769 (≈ $769.23).

3) Journal entry (weekly)
- Debit Annual leave expense $769.23 (increases expense).  
- Credit Provision for annual leave $769.23 (increases liability).

4) Why the correct answer is correct
- Recording the provision recognises an expense for leave earned during the week (so Annual leave expense increases).  
- Simultaneously, recording the provision increases the liability on the balance sheet because the company now has an obligation to pay that leave in the future (so Provision for annual leave increases).

5) Why the other options are incorrect
- “Decrease” for either line would contradict accrual accounting: creating a provision does not reduce expense or liability. It increases both expense (recognising cost incurred) and the provision (recognising the obligation).

Conclusion: The weekly entry causes Annual leave expense to Increase and the Provision for annual leave to Increase, which matches the provided answer: Increase, Increase.

Aussie Marketing employs five (5) full-time staff who are each paid $2,000 per week. Their employment contract entitles them to four (4) weeks of annual leave each year, which the business records on a weekly basis.[Fill in the blank]匹配题

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Aussie Marketing employs five (5) full-time staff who are each paid $2,000 per week. Their employment contract entitles them to four (4) weeks of annual leave each year, which the business records on a weekly basis.[Fill in the blank]匹配题

类似问题

B7 Calculate net income (or EAT):

When accounts receivable are overstated, revenues are overstated. Similarly, when inventory is overstated, cost of goods sold is usually unchanged.[Fill in the blank]

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Mr. Picard is checking out.He settles the outstanding balance by paying CHF 50 in TWIN and the remaining amount with his credit card.Which version of the bill is correct?

Based on the information from the accounting records of Rob's Retail Store provided above, calculate the value of total current liabilities.Just enter digits (you do not need to enter a $ or comma)[Fill in the blank]

In a Cash Flow Statement, the proceeds from selling shares that were held in another company would appear:[Fill in the blank]

Which of the following is not a liability?[Fill in the blank]

更多留学生实用工具

希望你的学习变得更简单

The export from Wonderland of a ¥200,000 gaming system to Neverland, which was paid for via a credit card, would result in a to Wonderland’s to reflect the export.