Journal Entry for Accrued Salary

Journal Entry for Accrued Salary

In this article we would explain the journal entry for accrued salary, sometime accrued salary is also called salary payable. The accrued salary means the salary incurred, but not yet paid. Under the accrual concept of accounting we need to record the transaction on bases of occurrence.

Journal entry for accrued shall be recorded by debiting the salary expense and crediting the accrued liability (salary payable). It is important to remember that salary and salary payable or two different heads of account.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Salary		xxx
01-01-2017	Accrued Salary			xxx

The expense head was debit, because there is increase in salary, while on other hand a liability was created with name of accrued salary. The following rules for debiting and crediting the expenses and liabilities shall be applied to record the accrued salaries.

·         Increase in expense is Debit.

·         Decrease in expense is Credit.

Similarly there are also two rules for recording the journal entry for liability.

·         Increase in liability is Credit.

·         Decrease in Liability is Debit.

Examples of Journal Entries Accrued Salary

1.    Salary amounting 120,000 of last month of the F.Y shall be paid next year.

2.    Due to some financial difficulty the salary amounting 18,000 for the month shall be paid late.

Date	Particular	Ledger Folio	Dr.	Cr.
31-12-2016	Salary		120,000
31-12-2016	Accrued Salary			120,000

Salary shall be debited as increase in expense and salary payable would be credited being increase in liability.

Date	Particular	Ledger Folio	Dr.	Cr.
31-12-2016	Salary		18,000
31-12-2016	Accrued Salary			18,000

It is important to note that by recording the journal entry of accrued salary, on one hand the expense was charged as expense in the accurate period and other hand a liability was created which is to be paid in future.

Journal Entry for Accrued Salary paid

In future, when the accrued salary shall be paid, then we would reduce/eliminate our accrued liability by debiting the accrued salary and crediting the cash.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Accrued Salary		xxx
01-01-2017	Cash			xxx