Wages Payable On Balance Sheet

Definition: Wages payable is a current liability account that records the corporeality of wages that are owed to employees for piece of work that was performed past the employees in prior periods. In other words, wages payable is the amount of wages that employee hasn't paid the employees for their work.

What is Wages Payable?

The wages payable account is normally used at the terminate of a period like a yr-end. Many times the end of the year doesn't autumn exactly at the end of a payroll menstruum. For instance, assume employees are paid every Friday and Dec 31 lands on a Tuesday. This means that at the beginning of the next year, January 1, the employer owes the employees 2 days worth of pay for the Monday and Tuesday worked in December.

Example

Since the employer pays the employees on Fri, these employees will accept to wait until January iii to become their full December wages. At the terminate of December, the employer owes the employees 2 days worth of pay, so information technology has to tape that liability in its bookkeeping system and present it on its financial statements.

How is Wages Payable Recorded?

On December 31, the employer simply debits the wage expense and credits the wages payable account for the Monday and Tuesday wages. Hither is the wages payable periodical entry.

Accrue Wages Payable Journal Entry Example

Subsequently in Jan when the wages are paid, the employer would debit the wages payable account because the wages are no longer owed to the employees and credit the cash account for the amount of greenbacks paid to the employees.

Pay Wages Payable Journal Entry Example