Financial Statements

Suppose there is a small-scale business called X-mart. Every year it makesa payment of 10,000 as salary.However, in the current year20% of the salary could not be paid for some reason. How would this transaction be reflected in the three different financial statements? (The increases and decreases mentioned in the options are w.r.t. the previous year.) Select the correct option from below.

• Accrued wages increase by 2,000 on the balance sheet. Salary expense to be recorded as8,000 onthe income statement.
• Accrued wages increase by 2,000 on the balance sheet. Salary expense to be recorded as10,000 onthe income statement.
• Salary expense to be recorded as10,000 onthe income statement. There is no impact on the balance sheet.
• Salary expense to be recorded as8,000 onthe income statement. There is no impact on the balance sheet.