Accruing Direct Labor Costs?

CFA Level I
#1

Does anyone know what the journal entry for Accruing Direct Labor Costs is? Couldn’t find anything related on Google.

My answer is wrong… :

DR Expense X

CR A/P X

The correct answer debits current assets (answer says inventory, which I find weird since this is direct labor cost) and credit current liabilities. No idea how that works …

Thank you!

#2

Direct labor implies a manufacturing company: labor costs are added to the inventory value; thus, they’re expensed when the inventory is sold (as COGS). The credit is to wages payable.

#3

Thank you S2000!!!

#4

You’re welcome.