How to Accrue Prepaid Salary
Adjusting entries represent a part of the accounting cycle. The entries update financial accounts to ensure accounts are accurate for the month-end closing process. One purpose of these entries is to accrue for payroll incurred but not yet paid to employees. Payroll accruals are among the most common entries accountants make at month's end. Income statements and balance sheets need these entries so financial statement users can make informed decisions. Accountants can make accrued salary entries as needed or just at month's end.
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Instructions
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Compute the salary to accrue by dividing the monthly salary amount by the number of weeks in the month.
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Determine the number of weeks necessary to accrue for the salary. For example, companies may pay every two weeks, meaning the accrual amount will most likely be two out of four weeks in the month.
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Debit salary expense and credit salary payable. This accrues the salary at month's end for the proper amount. A subsequent month entry will remove the entry from the books completely.
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Tips & Warnings
Companies can use just one salary expense and payable account or several depending on the company's general ledger.
