Answer:
C. Increase liabilities and decrease equity
Explanation:
Accrued wages are the wages expense which is incurred and no been paid yet. This expense is recorded as follow
Dr. Wages Expense $xxx
Cr. Wages Payable $xxx
Expense ultimately settles in the equity balance through net income and retained earning. It decreases the net income, retained earning and equity balance as well.
On the other hand the wages payable is a liability account, due to credit nature a credit entry will increase its balance.
Answer: C. Increase liabilities and decrease equity
Explanation:
Wages payable are wages that a firm's workers have earned, but have not yet been paid and using the accrual method of accounting, it is recorded with an adjusting entry at the end of the accounting period. This allows the amount to be included as a current liability in the balance sheet. An accrual of wages expense increase wages payable (a current liability) and decreases retained earnings (equity) resulting from the decrease in net income. Therefore, An accrual of wages expense would increase liabilities and decrease equity.
