From the course: Accounting Foundations: Statement of Cash Flows

Unlock the full course today

Join today to access over 23,000 courses taught by industry experts.

Wage expense and cash paid to employees

Wage expense and cash paid to employees

From the course: Accounting Foundations: Statement of Cash Flows

Start my 1-month free trial Buy for my team

Wage expense and cash paid to employees

“

- Cash paid to employees can be computed by using the wage expense amount reported in the income statement and the change in wages payable reported in the balance sheet. To illustrate, consider the following information taken from Silmaril Company's beginning and ending balance sheets, as well as from the income statement. First, let's make sure we understand the difference between wage expense and wages payable. Wage expense is the total amount the employees earned during the year. With wage expense of $3,000 for the year, it looks like the employee's average earning, $250 per month. $3,000 divided by 12 months. Wages payable, on the other hand, represents the amount of the wage expense that had not yet been paid in cash as of the last day of the year. So the ending wages payable of $370 means that, as of December 31st, Silmaril's employees had worked and earned $370 during the last part of the year for which…

Contents