by Salary payable is the amount of liability or payment of the company towards its employees against the services provided by them but not yet paid at the end of the month, year, or for a specific period of time. These amounts include the basic salary, overtime, bonus, and other allowance. These payables are required to recognize along with the salary’s expenses in the company’s financial statements at the end of the period. Salary payable is a current liability account containing all the balance or unpaid wages at the end of the accounting period.
The amount of salary payable is reported in the balance sheet at the end of the month or year, and it is not reported in the income statement.
Accounting treatment of salary payable:
Salary payable is classified as a current liability account under the head of current liabilities on the balance sheet. All the general rules of accounting are also applicable to this account.
Salary expenses are the income statement account. It is sometimes recording under the cost of goods sold, cost of services, or operating expenses depending on how the staff is involved in the operation.
Salary payable and accrued salaries expenses are the balance sheet account, and they are recording under the current liabilities sections. This account is decreasing when the company makes payable to its staff.
When the salaries expenses are recognized, but the company has not paid yet to its staff, the following journal entries should be recorded:
Dr Salary expenses XXXX
Cr Salary payable XXXX
And if the salaries are pay to its staff, then the following journal entries should be recorded:
Dr Salary payable XXXX
Cr Cash or bank XXXX
Salary expenses are the income statement account, and it records all of the salary expenses that occur during the period or year. However, the salary payable account is the balance sheet account that reports only the unpaid amount.
The same as other liabilities accounts, salary payable increase is recording on the credit side, and when it is decreasing is recording on the debit side. The recording is different from the recording of assets or expenses, and it is the same effect as revenues and equity.
Salary payable Vs Accrued salary expenses:
Accrued salary expenses are different from the salaries payable. The company knows the exact amount of payment to be paid and actually incurred in the salaries payable.
However, the company’s accrued salary expenses are the expenses that the company is expected to incur based on their best estimate. However, the company does not know yet the exact amount incurred. The company needs to accrue the expenses.
Payroll journal entries fall under the payroll account and are part of your general ledger. Record the following expenses in your payroll account:
- Payroll taxes: Federal income, Social Security, Medicare, and applicable state or local income taxes withheld from employee wages.
- Employee compensation: Salaries, wages, bonuses, commissions, and other taxable income reported on Form.
- Employer taxes: Employer match of Social Security and Medicare taxes, as well as federal and state unemployment taxes
- Employee deductions for benefits: Health insurance, retirement plan, etc.
- Employer portion of fringe benefits: Health insurance, life insurance, education assistance, etc.
- Other deductions: Child support, spousal support, outstanding tax liabilities, etc.
