SALARIES IN ARREARS IS TREATED IN THE BALANCE SHEET AS A
- A. current asset
- B. current liability ✓
- C. long term liability
- D. fixed asset
The answer to the question is: B. current liability
Salaries in arrears refer to the wages that are owed to employees but have not been paid by the company. When considering how salaries in arrears are treated in the balance sheet, it is important to understand the accounting principles and the nature of this liability.
Salaries in arrears are typically classified as a current liability on the balance sheet. A current liability is a financial obligation that is expected to be settled within the normal operating cycle of the business, usually within one year. Since salaries in arrears represent an amount owed to employees for work already performed, they meet the criteria of a current liability because they are expected to be settled in the near future.
Furthermore, under generally accepted accounting principles (GAAP), it is essential to accurately reflect the company’s financial obligations. Salaries in arrears represent a debt that must be paid and are therefore recorded as a current liability on the balance sheet to provide a true and fair view of the company’s financial position.
In summary, salaries in arrears are treated in the balance sheet as a current liability.
