Accounting Demystified

Payroll Accrual

Think of your last paycheck. Were you paid for every day you worked right up until the check date? In most companies, the answer is no. There is usually a lag between the end of the payroll period and the pay date (the date of the payroll check). The adjusting entry to accrue the payroll is derived by looking at the portion of the payroll that has not been paid prior to the end of the accounting period. Let's say a company has employees who work only during the week (Monday, Tuesday, Wednesday, Thursday, and Friday). There are three employees, and each of them earns $200 per day (or $1,000 per week). They are paid every other week with a one-week lag. Payday is always Friday. If the last payroll was on December 25, how much should ...