What is the purpose of payroll-related accrual and reversal entries on financial

Question

What is the purpose of payroll-related accrual and reversal entries on financial statements?  (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

Reversing entries represent disbursement of accrued payroll prior to the end of the payroll period. Reversing entries are omitted from financlal statements. Accrual entries are used to improve the accuracy of the net Income for a period. Accrual entries represent payroll amounts earned but not yet pald

Explanation / Answer

Pay-Roll related Accrual and reversal entry: This is a expenses which is not paid in month of accrued but paid later in the month. Ex. Employee worked in the month of december but they are not paid in the month of december. They are paid in the month of january of nexy year.

So in the month of december we make the entry of accrued and make the payment in nect month

Option 1 = This option is incorrect because in this cash earned in different period and pais in different period.

Option 2: REversing entry will nullified the outstanding balance of the last period and so omitted from the financial statement = This option is correct.

Option 3 = This option is correct because this will improve the income of the period

Option 4 = This option is also correct.

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