What are Accrued Wages - Definition - Meaning - Example

Accrued Wages means the amount of wages earned by the workers but the payment for the working hours done still has not yet been received from the company. In a factory, workers performed many projects on daily basis, so these are paid at the end of the day when they done their work or they are paid on monthly basis. Such amount of wages due from the company is called Accrued Wages. Accrued Wages are examples of Accrued Expenses.

You Can Also Read Out, “What Are Accrued Salaries”

For Example, workers done the task for a project during the month, but the payment is still due from company, then it is a Current Liability of the company to pay to the workers on the next month as agreed upon. The following Accrued Wages Journal Entry is Passed according to Accrual Basis of Accounting:

                                Wages Expense a/c   XXX

                                                             Accrued Wages a/c  XXX

    (Wages Accrued For the Month)

The above Entry is Reversed on the next month when the company actually pays wages.

When the company actually paid the wages to the workers on the next month, then following entry is recorded:

                                       Wages Expense a/c   XXX

                                                                      Cash a/c   XXX

(Wages Paid To Workers For the work done in the previous month)

Wages Expense Journal Entry

When Wages Expense of Rs. 5000 is paid by the company to the workers, the following journal entry is made:

                                           Wages Expense a/c  5000

                                                                           Cash a/c  5000

   (Wages Expense Paid For Cash)

Wages Expense is an indirect expense categorized as Operating Expense in the Income Statement.