Which financial statement best shows wages payable as of a date?

Which financial statement best shows wages payable as of a date?

• A. Income statement
• B. Balance sheet
• C. Statement of cash flows
• D. Statement of owners' equity

Answer: (B)

Wages payable is a current liability—an obligation the company owes to employees as of a specific date. The balance sheet shows the company’s financial position at a single point in time, listing assets, liabilities, and owners’ equity. Since wages payable represents what the company owes at that date, it belongs on the balance sheet. The income statement covers activity over a period (revenues and expenses for that time frame), so wages payable wouldn’t appear there as a remaining amount. The cash flow statement tracks cash inflows and outflows over a period, including cash paid for wages, but it doesn’t present the obligation as of a date. The statement of owners’ equity shows changes in equity over a period, not current liabilities. Therefore, the balance sheet is the best place to show wages payable.

Wages payable is a current liability—an obligation the company owes to employees as of a specific date. The balance sheet shows the company’s financial position at a single point in time, listing assets, liabilities, and owners’ equity. Since wages payable represents what the company owes at that date, it belongs on the balance sheet.

The income statement covers activity over a period (revenues and expenses for that time frame), so wages payable wouldn’t appear there as a remaining amount. The cash flow statement tracks cash inflows and outflows over a period, including cash paid for wages, but it doesn’t present the obligation as of a date. The statement of owners’ equity shows changes in equity over a period, not current liabilities. Therefore, the balance sheet is the best place to show wages payable.