Is Salary Expense An Asset Or A Liability? What Is Its Treatment In Accounting
A salary is a business term that means a fixed regular payment that is made by the employer to the employees for their services in the business functions.
Is Salary Expense An Asset Or Liability?
Salary expense is part of the business’s core areas or operations. This expense is neither an asset nor a liability because this expense is treated as an operating expense in the statement of profit and loss and is deducted from the revenue.
The operating costs/expenses such as salary and utilities are the costs that are associated with the business operations, so they are deducted from the revenue to give the net profit or net loss of the year for a company.
Salary expenses can be a liability or an asset as per the conditions. The following are the two conditions when salary expenses are treated as either an asset or a liability.
- Salary expenses can be treated as an asset if the salaries of the employees are paid in advance. (This is not a normal condition).
- Salary expenses can be treated as a liability if an employer does not pay the employees on time, it becomes the accrued expense that is recorded in the balance sheet as a current liability.
FAQs
Is salary expense a depreciation?
Depreciation is a method of accounting that helps a business to find the cost of an asset over its useful life while the salary expense is only an expense account that is not depreciated.
Is salary expense a deferred tax?
Deferred tax is the different treatment of an event or a transaction in accounting or taxation terminology.
Is salary expense a disposal?
Disposal means the selling of something by a business for cash inflow while the salary expense is the cash outflow.
Is salary expense a deferred revenue?
Deferred revenue is an unearned revenue that is considered a liability while a salary expense is the cost of operating a business.
Is salary expense a development expense?
Salary expense is an operating expense while the development expense is the cost incurred by a company on researching, designing, and launching a new product, service, or technology.
Are wages expense an asset?
Wages are treated as an expense in the financial statements.
Is payroll expense an asset?
Payroll is the payment to the employees by the employers, and it is an expense account, not an asset account.
Are accrued salaries expense an asset?
Accrued salaries are considered a liability in a business because accrued salaries are the accumulated salaries expense that is not paid by the employer to the employees.
Is salary expense a current asset?
Normally salary expenses are recorded as an expense in the financial statements of a company but if salaries are paid in advance then it is recorded as a prepaid asset in the balance sheet and a prepaid asset is a current asset.
Is salary expense an asset or a bed debt?
A salary account is neither an asset nor a bad debt, it is an expense account.
What kind of account is a salary account?
A salary account is an expense account for a company that is treated as an operational expense in the income statement.
When is a salary account considered an asset?
When an employer pays the employees in advance, it is recorded as an asset in the statement of financial position and makes an entry of prepaid salaries.
Where is salary expense on the balance sheet recorded?
Salary expense is not recorded on the balance sheet because it is an expense account that is recorded on the income statement but if the salaries are not paid to the employees on time, it becomes a liability for a company that recorded on the balance sheet a current liability.