Accrued Wages Debit Or Credit

Accrued Expense Journal Entry

Overview

Accrued expense is the expense that has already incurred during the period simply has not been paid for nonetheless. The accrued expenses may include interest expense, salaries and wages, and utility expenses, etc. Likewise, at the period finish adjusting entry, the company needs to account for all the accrued expenses with appropriate journal entries.

Accrued expense periodical entry is made to record the expense that has already incurred also as to recognize the obligation liability that the company has. Hence, without a proper record of the accrued expense at the catamenia end adjusting entry, both total liabilities in the balance canvass and full expenses in the income statement will be understated.

Accrued expense journal entry

The company can brand the accrued expense journal entry by debiting the expense account and crediting the payables account.

Account	Debit	Credit
Expense	000
Payables		000

The company makes this periodical entry to recognize the incurred expense too as the obligation existed at the terminate of the period. Likewise, this journal entry increases both the expense (debit) in the income statement and the liability (credit) in the residual sheet.

Subsequently the company makes the payment, it tin make the journal entry to eliminate liability by debiting the payables account and crediting the greenbacks account.

Account	Debit	Credit
Payables	000
Greenbacks		000

This journal entry does non impact the income statement as the company has already recognized the expense at the last menses-end adjusting entry.

Example

For case, the company ABC Ltd. has the policy to pay the wages to its employees every 2 weeks. On July 24, 2020, the company made the $5,000 wages payment for the 2 weeks (or ten days) of work the employees have performed.

The adjacent wage payment will not occur until August 07, 2020. Hence, at the end of July, the visitor needs to recognize the expense of $2,500 (five,000 / x x five) that the employees take worked for 5 days (from Monday 27^thursday to Friday 31^st).

1. What is the journal entry of accrued expense for wages in the July 31 adjusting entry?

two. What is the journal entry for the $five,000 wages payment on August 07, 2020?

Solution:

1. July 31 adjusting entry

In the July 31 adjusting entry, the visitor ABC Ltd. tin can make the accrued expense of periodical entry for the five days of wages as below:

Account	Debit	Credit
Wages expense	2,500
Wages payable		2,500

In this journal entry, the company recognizes (debit) $2,500 as accrued expense since the employees have already worked for five days but have non been paid for nonetheless. On the other paw, the $2,500 of wages payable (credit) is the liability that the visitor owes to its employees for the five days of works.

If this journal entry is not recorded, both total expenses in the income argument and total liabilities in the balance sail will be understated by ii,500.

2. Wages payment on August 07, 2020

When ABC Ltd. makes the $five,000 payment of the wages on August 07, 2020, it tin can make the journal entry as beneath:

Account	Debit	Credit
Wages payable	two,500
Wages expense	2,500
Cash		5,000

The debit of ii,500 in wages payable business relationship here is to eliminate the wages liability that the company has recorded in the July 31 adjusting entry. On the other hand, the ii,500 of debit in wages expense is to recognize the expense that has already incurred for 5 days (from Mon 3^rd to Friday seven^th) in the current period of August.

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