Employees commonly earn wages that are yet to be paid at the

Employees commonly earn wages that are yet to be paid at the end of a year. Should their wages be recognized as expenses in the period that the work is performed or when the wages are paid?

Solution

Under accrual accounting, \"revenues are recognized when earned and expenses are recognized when owed\".

So, based on above principle, wages that are yet to be paid at the end of accounting period i.e accrued wages should be recognised as expenses in the period work is performed even though they are not paid.

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