It is quite common to have some amount of unpaid wages at the end of an accounting period, so you should accrue this expense (if it is material). The accrual entry shown below is a simple one, because you typically clump all payroll taxes into a single expense account and offsetting liability account. After recording this entry, you reverse it at the beginning of the following accounting period, and then record the actual payroll expense whenever it occurs.
A sample transaction follows:
|Direct labor expense||xxx|
|Salaries expense [by department]||xxx|
|Accrued salaries and wages||xxx|
|Accrued payroll taxes||xxx|
Companies with predominantly salaried staffs frequently avoid making the accrued wages entry, on the grounds that the wages due to a small number of hourly personnel at the end of a reporting period have a minimal impact on reported financial results.
The information for the wage accrual entry is most easily derived from a spreadsheet that itemizes all employees to whom the calculation applies, the amount of unpaid time, and the standard pay rate for each person. It is not necessary to also calculate the cost of overtime hours earned during an accrual period if the amount of such hours is relatively small.