Question 6 Employees of a firm are entitled to receive a monthly salary totaling $100,000. The firm immediately pays $50,000 of the salary it owed to employees on the last day of that month. What is the effect of these transactions under Accrual Accounting and Cash Accounting for the current period?

In Cash Accounting the salary expense in $50,000; in Accrual Accounting the salary is $100,000

Explanation:

The Cash Accounting method only records expenses when actual cash has been paid. As such, with the employees only being paid $50,000 of their salary, this is the only amount that will be recorded as salary expense for the month.

With Accrual Accounting however, expenses are recorded in the period in which they were incurred. The employees were owed $100,000 for work done in the month and even if they were not paid, the salary expense will be $100,000.

answer(b) gdp is not affected by

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