321 – Payroll Payable

Current Liabilities

Accrued Liabilities

Synopsis

Account 321

Debits

Credits

  1. The reversal of the prior month-end payroll accrual.

  2. The amount of vacation, sick leave, and time-off pay that is included in the regular payroll or paid separately to employees.

  3. Adjustments to decrease the accrual balances based on current requirements.

 

  1. The monthly accrual for gross salaries, wages, commissions, and incentives earned from the ending date of the last payroll period to the month-end.

  2. The monthly provision for productive employees for vacation, sick leave, and time-off pay.

  3. Adjustments to increase the account balance based on current requirements.

 

Remarks:

The balance in this account represents the amount of salaries, wages, commissions, incentives, earned in the current accounting period which are payable in a subsequent accounting period.

Also included in this account would be accrual of vacation, sick-leave, and time-off wages of productive employees whose wages are normally charged to cost of sales.  However, if additional expenses will be incurred due to vacations, etc., of other employees, provision should be made for the anticipated expenses.

When the end of a pay period does not coincide with the end of the month, the amount of employees' compensation earned but not paid or recorded during the month should be accrued individually by employee and recorded in the payroll journal.  Promptly at the beginning of the following month, the (previous month's) payroll accrual should be reversed.

Payroll advances and draws are construed as wages at the time of payment.  Therefore, it is recommended that such advances and draws be issued on a payroll check.

Note: