Quick Finance Tip - Salaries Expense, Salaries Payable, and Accounting For It Example

If a company pays out their salaries every two weeks, and you encounter a situation where you need to prepare financial statements at a time that salaries have not been paid out, you can consider the following. If $100K is due every two weeks, and you need to prepare your statements September 30th, but pay out October 4th, you can then do the following: 

• Know 60% of the amount has accrued (6 of 10 working business days)
• Therefore, 60% * the $100K = $60K accrued
• Then your salaries expense = $60K (you debit your P&L)
• Then your salaries payable = $60K (you credit your liability)
• Knowing that on pay day, you will expense your $100K (debit) and then credit cash, and reduce the salaries payable.