JournaldrillAccrued wages
At period end, wages employees have earned but not yet been paid are accrued by debiting Wages Expense (or Salaries Expense) and crediting Wages Payable. On payday you debit Wages Payable for the accrued part, debit Wages Expense for the rest, and credit Cash.
Syntax
Dr Wages Expense / Cr Wages Payable; payday: Dr Wages Payable, Dr Wages Expense / Cr Cash| Part | What it is |
|---|---|
Wages Expense / Salaries Expense | Expense debited for the days worked in the period. |
Wages Payable / Salaries Payable | Current liability credited at period end and cleared on payday. |
Cash | Asset credited when the payroll is actually paid. |
Examples
Dec 31: Dr Wages Expense 4,000 / Cr Wages Payable 4,000Result: Expense up 4,000, liabilities up 4,000
Employees worked the last three days of December; the 4,000 for those days is paid on January 3.
Jan 3: Dr Wages Payable 4,000, Dr Wages Expense 2,000 / Cr Cash 6,000Result: Liabilities down 4,000, January expense 2,000, assets down 6,000
The full week's payroll of 6,000 covers three December days and two January days.
Jan 1 reversing entry: Dr Wages Payable 4,000 / Cr Wages Expense 4,000; Jan 3: Dr Wages Expense 6,000 / Cr Cash 6,000Result: Same net January expense of 2,000
Optional reversing entry lets payday be recorded in the usual way.
Common mistakes
- Expensing the full payroll in the month it is paid: the days worked in December belong to December's income statement.
- Crediting Cash in the accrual: no cash moves at period end, so the credit is to Wages Payable.
- Making the reversing entry and then also debiting Wages Payable on payday: use one method or the other, not both.
Practice Accrued wages
These drills check your answer on live data, free, no account needed.
- Accrued wagesGreenleaf Landscaping's crew earns a combined $1,250 per day and is paid every Friday for a Monday through Friday work week. The accounting period ends on a Wednesday, and the crew has worked Monday, Tuesday and Wednesday of that week without being paid. Record the adjusting entry.
- Recording payrollNorthgate Print Shop's gross wages for the period are $48,000. Withholdings are federal income tax of $6,240, Social Security tax at 6.2% and Medicare tax at 1.45%. No employee has reached any earnings limit. Record the payroll; wages will be paid later.
Questions
What is the adjusting entry for accrued salaries?
Debit Salaries Expense and credit Salaries Payable for the amount earned by employees but unpaid at period end.
Is accrued wages a liability?
Yes. Wages Payable is a current liability because the company owes the employees for work already done.
How do I calculate accrued wages?
Daily wage cost times the number of workdays between the last payday and the period end.
Related
- Payroll entryHow to record payroll: Dr Wages Expense for gross pay, Cr the withholding liabilities (income tax, Social Security, Medicare) and Cr Cash for net pay.
- Accrued interestHow to accrue interest on a note at period end: Dr Interest Expense, Cr Interest Payable (borrower) or Dr Interest Receivable, Cr Interest Revenue (lender).
- Accrued revenueHow to record revenue earned by period end but not yet billed or collected: Dr Accounts Receivable, Cr Service Revenue. With the later collection entry.
- Employer payroll taxesHow to record the employer's payroll taxes: Dr Payroll Tax Expense, Cr FICA Social Security, FICA Medicare, FUTA and SUTA Payable. Rates and wage bases.