Accrued Payroll Journal Entry, Step by Step

Calculate an accrued payroll journal entry from days earned, record the liability, and avoid double-counting salary expense when the payroll is paid.

Quick answer

An accrued payroll journal entry recognizes compensation employees earned before the reporting date but the employer has not yet paid or recorded. Debit Salary Expense or Wage Expense and credit Salaries Payable, Wages Payable, or Accrued Payroll. The expense belongs to the period receiving the employee service, while the credit reports the unpaid obligation.

Recognize compensation when employees earn it

Cash does not appear in the adjustment because no payment occurs at closing. The later payroll entry clears the liability and records compensation earned in the new period.

This is one application of accrual accounting. The complete cash-versus-accrual framework remains with Accrual Accounting. This page narrows the issue to compensation earned across a closing date, the calculation, the adjusting entry, and the later settlement.

Five-day payroll crossing the reporting date
  1. 1First three workdays$30,000 of the $50,000 weekly payroll is earned by December 31.
  2. 2December 31 adjustmentRecognize $30,000 of Salary Expense and Salaries Payable.
  3. 3Final two workdays$20,000 is earned in the next reporting period.
  4. 4PaydayClear the $30,000 prior-period payable, recognize $20,000 of new-period expense, and pay $50,000 under the simplified facts.

Worked example: a weekly payroll crossing year-end

  1. 1A five-day weekly gross payroll of $50,000 is paid after year-end. Employees completed three workdays by December 31, and none of the payroll has been recorded.
  2. 2Accrued compensation is $50,000 x 3/5, or $30,000. Debit Salary Expense and credit Salaries Payable for that amount.
  3. 3The remaining $20,000 belongs to January. Under simplified facts without withholding, payday debits the $30,000 payable and $20,000 January expense, then credits Cash for $50,000.
Payroll accrual calculation
StepCalculationResult
Daily payroll$50,000 / 5 workdays$10,000 per day
Earned by December 31$50,000 x 3/5$30,000 accrual
Earned in January$50,000 x 2/5$20,000 new-period expense
Accrued payroll journal entries
EventAccountDebitCredit
December 31 adjustmentSalary Expense$30,000
December 31 adjustmentSalaries Payable$30,000
Simplified paydaySalaries Payable$30,000
Simplified paydayJanuary Salary Expense$20,000
Simplified paydayCash$50,000
Expense, liability, and cash across the two periods
EventSalary expense recognizedSalaries Payable changeCash change
December 31 adjustment+$30,000 in December+$30,000$0
Simplified payday+$20,000 in January-$30,000-$50,000
Full payroll cycle$50,000 across both periods$0 ending balance-$50,000

Practice the CPA topics covered on this page

Practice CPA exam questions and use your results to find the topics that need more work.

Find My Weak Areas

Calculate only the earned and unrecorded amount

Read the pay period, reporting date, workdays, and compensation basis. The adjustment equals compensation earned through closing that is not already recorded.

For hourly facts, use qualifying hours and the stated rate. For salaried facts, allocate the relevant pay period consistently. Analyze separately stated bonuses or other compensation separately.

Keep gross compensation, employee withholding, and employer payroll taxes distinct. Include those liabilities only when the facts supply them. Tax compliance remains with its governing material and REG study guide.

Common payroll accrual mistakes

Do not count calendar days when the problem gives workdays, and do not accrue the full next paycheck when part is earned after closing.

Do not credit Cash at period end or debit the prior-period amount to expense again on payday.

Use a reversing entry only when the facts state one. It changes next-period mechanics, not the required closing accrual.

The planned debits-and-credits page will own the broad normal-balance lesson. The new Trial Balance page owns how this adjustment changes the adjusted balances and statements. Keeping those boundaries prevents an accrued-payroll answer from becoming a duplicate accounting-cycle guide.

A repeatable payroll accrual checklist

  • Identify the pay period, pay date, reporting date, and service days.
  • Calculate compensation earned through closing, subtract amounts already recorded, and credit the proper payable.
  • On payday, clear the prior liability before assigning any remainder to the new period or withholding accounts.
  • Use CPA exam blueprints and FAR study guide for scope, then practice at free FAR practice and label timeline, earned-amount, liability-direction, or duplicate-expense misses.

Frequently asked questions

What is the accrued payroll journal entry?

For compensation earned but unpaid at period end, debit Salary or Wage Expense and credit Accrued Payroll, Salaries Payable, or Wages Payable. The exact account label can vary, but the entry recognizes current-period expense and a closing-date liability.

How do you calculate a payroll accrual?

Use compensation earned through the reporting date but not yet recorded. In a simple time-based question, multiply the payroll for the full pay period by the fraction of workdays earned before year-end, then adjust for any amounts already recorded.

What happens when the accrued payroll is paid?

Clear the accrued liability for the prior-period amount, recognize expense for compensation earned in the new period, and credit cash plus any stated withholding liabilities. Do not record the prior-period portion as expense a second time.

Sources