Wage Accrual

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Create a salary and wage accrual entry when employees have worked some hours at the end of the reporting period for which they have not yet been paid. If a company pays on a weekly or biweekly basis, then this entry will probably be required for both the salaried and hourly employees. If it pays semi-monthly or monthly, then the entry is probably only needed for hourly employees, since salaried personnel will have been paid through the last day of the reporting period. For example, if a company pays its employees once a month, based on timesheets completed through the preceding weekend, then it must accrue for unpaid wages for any hourly personnel who worked any days between the end of the last time reporting period and the end of the month.

A sample transaction follows:

	Debit	Credit
Direct labor expense	xxx
Salaries expense [by department]	xxx
Accrued salaries and wages		xxx
Accrued payroll taxes		xxx

This wage accrual entry should be reversed in the following accounting period, when the unpaid time will be included in the next payroll.

Companies with predominantly salaried staffs frequently avoid making the wage accrual entry, on the grounds that the wages due to a small number of hourly personnel at the end of the reporting period will have a minimal impact on reported financial results.

The information for the wage accrual entry is most easily derived from an electronic spreadsheet that itemizes all employees to whom the calculation applies, the number of unpaid days, and the standard rate of pay for each person. It is generally not necessary to also compile actual or estimated overtime costs for the unpaid days, partially because the timekeeping system may not readily accumulate this information for the last few days of the reporting period, and partially because it may require an excessive amount of effort to calculate this additional cost.