Accrued Salaries Journal Entry

We already discussed about Accrued Expenses in our previous topics. So, here we will study about a famous example of Accrued Expenses that is “Accrued Salaries Or Salaries Payable Or Unpaid Salaries Or Salaries Arrears”. These are also known as Accruals.

You may also be Find This Article Helpful, “Prepaid Rent Journal Entry”

In a company, employees working on suitable position provide services and get reward or Salaries in exchange for services delivered. These Salaries are Expenses for the company because these are necessary to incurred in order to promote products and generate sales. So, these Salaries are Outstanding or Accrued for the company at the end of Month, because employees already delivered services for the selected tasks and projects and these are due from company.

Suppose, an employee, Mr. A, as a Sales Manager already delivered services for different campaign projects in the Current Month, then the Salary i.e., Rs. 500000 is due from company to him. So, by following Matching Concept Gaap, the company adjust Salaries Expense with the Revenue of the same period.

So, to Adjust this Salary Expense with Revenue of Sales made due to different campaign conduct by Mr. A, the company passed the following Adjusting Entry in the Book or Journal of the business as shown below:

Accrued Salaries Adjusting Entry /  Salaries Arrears Journal Entry

(Assume that Outstanding Salary initially recorded as an Expense)

                            Mr. A’s Salary Expense a/c     500000

                                                                      Accrued Salary a/c     5000000

(Salary of Rs. 500000 Due From Company To Employee, Mr. A)

When the company actually paid the amount to Mr. A, the above entry is reversed and now the company is longer liable to pay Salary to Mr. A. When actually paid salary to Mr. A for Cash, then following Accounting Journal Entry is passed:

                               Mr. A’s Salary Expense a/c      500000

                                                                       Cash a/c     500000

(Paid Salary To Mr. For Cash)

The Accounting Journal Entry to record Salaries for all employees is as:

                      Salaries Expense a/c     XXX

                                                   Outstanding Salaries / Accrued Salaries a/c    XXX

(Outstanding Salaries Recorded At The End of Month)

Salaries Payable Debit Or Credit

The Normal Balance of Salaries Payable is Credit. However, when it decreases as we pay off it decrease, so we debit it. For More Detail, You Can Read, "Rules of Debit And Credit"

Salaries Payable On Balance Sheet

Accrued or Salaries Payable is shown on the Balance Sheet as a Current Liability under Liabilities & Equity Side.

So, Accrued Salaries or Outstanding Salaries or Salaries Payable are Current Liabilities for the company which are payable by the business to its employees that delivered or performed their duties for the Current Accounting Period.