Which Of The Following describes the Salaries Payable Account?

Salaries Payable is an account that every company with employees maintains on its balance sheet. This is classified under the broader category of accrued expenses and assists in making provisions for a company’s payroll and compensation. In this blog, we'll cover everything you need to know about the salaries payable account including:

- Some of the topics covered in the book include; What is meant by the Salaries Payable Account?
- When Are Salaries Payable Accounted For?
- Accounts Payable For Salaries Timesheets
- I need to know where in the Balance sheet, you would place Salaries Payable.- This is a sub-process of the control and reconciliation of salaries payable.
- Other Key Points About the Salaries Payable Account Basic knowledge and understanding about the account Salary payable account is an important account that records the amount that is owed to employees for their wages or salary. Although the above points may be considered as the major aspects of this account, other important aspects deserve special attention.

What Is the Salaries Payable Account?

The account that is most commonly known as salaries payable or wages payable is a liability account that is used to record the wages and salaries that they are owed from employees for the services rendered before the end of a given fiscal period but which are not yet paid for.

This account records the company’s liability to pay the wages and salaries that employees are owed in a particular period but have not been paid. Examples include wages earned for each hour worked, regular salary, and the employee’s earned wages arising from any unused working hours such as vacation or paid time off. Wages and/or salaries, which are given by employers to their employees, are earned progressively through every working day of a given pay cycle and are usually paid out only on the specified, fixed date, the ‘payday’.

When Are the Salaries Payable Recognized?

Wages and salaries are recognized after the accounting period, often monthly or biweekly. This amount represents gross wages and salaries payable as they are the total gross amount of wages and salaries earned by the employees but which have not been paid to the employees. It may also include related expenses in connection with payroll amounts such as payroll taxes.

Finally, the accurate and suitable payroll accrual balances help to make the company’s financial statements accurate with the matching of the expenses to the periods when they were incurred as per the matching principle of accrual accounting.

Salaries Payable Accounting Entries

There are two main accounting entries made to record and adjust the salaries payable balance:

1. Accrual at period-end. This recurring journal entry credits salaries expense and debits the salaries payable liability account for the amount of gross pay owed:

Salaries Expense
Salaries Payable

2. Payment at the time of payroll is when the employer pays his employee using the employee’s paycheck as the mode of payment. This entry debits the Salaries Payable account and credits cash when paying employees their earned wages: This entry debits the Salaries Payable account and credits cash when paying employees their earned wages:

Salaries Payable
Cash

The first entry establishes an account for the estimated amount that is payable to employees based on their work done in the future. The second entry eliminates this liability when salaries are paid in the normal fashion after the period- ends.

In which line item on the balance sheet is ‘Salaries Payable’ placed?

On the balance sheet, the salaries payable amount is commonly grouped with all other current liabilities either labeled as:

- Accrued payroll
- Accrued wages or salaries refers to a situation where employees have earned their wages or salaries but have not been paid.
- Compensation payables
- The second balance sheet component is the total salaries and wages payable.

This is categorized under current liabilities since the employees’ wages and salaries are usually settled in one or two or more months depending on the situation, through cash or other readily available assets.

A. Control of Salaries Payable B. Reconciliation of Salaries Payable

For all balance sheet accounts, it is important to conduct routine checks and auditing of the accrued salaries payable balance. This is where payroll specialists will perform a comparison of the general ledger balance with other payroll ledger balances as well as payroll records and reports.

Some typical reconciling items that are likely to be found are unpaid hourly wages or salaries, bonuses in the course of preparation of the wages or salaries, vacation pay owing, and/or payroll taxes payable amounts that may be directly related to wages incurred. These should be resolved through research and balance the account on a reasonable basis of standard adjustment entries.

Other Key Points About the Salaries Payable Account

Here are some final key facts and best practices regarding the salaries payable account:

- The balance reflects a Company’s near-term obligation and future expenditures when paying employees. These aspects of working capital help managers to be sure that there is enough cash available.

- They may contain relatively large differences from month to month or between biweekly pay intervals depending on when the paydays and payrolls are computed.

- The liability will hardly reach zero at any time because there will always be a certain level of unpaid salaries as long as there are new accruals by the time the next payroll is produced.

- Salary and wage control should always tally with the general ledger total where itemized data of salary and wage rates per employee and by hours worked exist.

- Proper accruals are under the matching concept and eliminate the possibility of a gross misrepresentation of period costs and obligations.

In conclusion, the salaries payable account is among the accrued expenses account that shows in the balance sheet, which is wages or salaries that employees are owed for services rendered but not yet paid. To emphasize the importance of proper utilization of this account in financial accounting and reporting of an organization with employees.

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