Question

Why there is no Journal Entry? Isn't Frank already performed the service and although he is not paid yet, there should be a wages expense and a wage payable?

Also, is there a difference between journal entry and adjusting journal entry? If yes, teach me how to distingush

Thanks!

7. On December 28, at 9am, XYZ hires an emplovee named Frank, who begins working immediately. December 28 is a Monday. The work week is Monday through Friday. The next pay day is Friday, January 8. Frank is hired for the weekly rate of $5,000. Worges Expence 1,000 Wage Panable 22 863, Cech Ulle None. looo o

Answer 1

• First of all, I will explain why there is no journal entry

A journal should be passed only if the transaction takes place. which means, here Frank has already worked, but the normal due date of the wages for his work which XYZ pays is only on Friday. So, in this case, the due date will be only on January 8. Hence wages will not accrue until January 8.

Now to make it clear, if XYZ made the payment on January 8 the entry will be passed for the payment of wages (Dr Wage expense and Cr Cash/Bank).

OR

if XYZ does not make the payment on the due date (ie, January 8) The entry will still be passed and that will be adjusting entry (Dr wage expense and Cr Wage payable)
To conclude the journal entry will be recorded earliest of the due date or actual payment date and it does not consider the work Frank did in the company.

• Difference between journal entry and adjusting journal entry

Normal journal entries are created to record the usual business transactions.

Adjusting entries are accounting journal entries that convert a company's accounting records to the accrual basis of accounting. In a practical sense, The purpose of adjusting entries is to convert cash transactions into the accrual accounting method. Accrual accounting is based on the revenue recognition principle that seeks to recognize revenue in the period in which it was earned, rather than the period in which cash is received.