Accrued vacation

Accrued vacation is the amount of time-off pay earned by employees, but not yet used by them. The amount of accrued vacation is a benefit to employees, and a liability to the employer. If an employee does not use accrued vacation time by the end of his or her employment, the remaining unused amount is paid by the employer, based on the last hourly rate paid to the employee.

The accrued salaries entry is a debit to the compensation (or salaries) expense account, and a credit to the accrued wages (or salaries) account. The accrued wages account is a liability account, and so appears in the balance sheet. If the amount is payable within one year, then this line item is classified as a current liability on the balance sheet.