USA — Salaries Payable Accrual (Period-End Cutoff — Wages Earned but Not Yet Paid)
Accruing salaries and wages earned through the accounting period-end date that will not be disbursed until the next pay date — the universal period-end cutoff entry ensuring expenses are matched to the period in which work was performed.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Salaries & Wages Expense — Accrual (Earned Through Period-End; Pay Date in Next Period) | Expense (+) | 1,925,000.00 | - |
| Employer Payroll Tax Expense — Accrued (FICA + SUI on Accrued Wages) | Expense (+) | 175,000.00 | - |
| Accrued Salaries & Wages Payable (Current Liability — Reverses on Next Pay Date) | Liability (+) | - | 1,925,000.00 |
| Accrued Payroll Taxes Payable (FICA + SUI on Accrued Wages) | Liability (+) | - | 175,000.00 |
💡 Accountant's Note
The pay period rarely ends on the last day of the accounting period. A company on bi-weekly payroll (pay periods ending every other Friday) with a March 31 quarter-end falling on a Tuesday will have 4 days of wages earned (Saturday through Tuesday) that won't be disbursed until the following Friday. These wages MUST be accrued at March 31 under the matching principle and accrual basis of accounting. The accrual formula: (Total bi-weekly payroll ÷ 10 working days) × working days in the accrual stub period. Employer payroll taxes (FICA employer match and SUI) must also be accrued on the same gross wages — they are incurred when the wages are earned, not when paid. The accrual is reversed in the new period (April 1) so that when the actual payroll is processed on the pay date, only the new period's wages are expensed. Without the reversal, wages would be double-counted. Overtime, commissions, and bonuses earned but not yet paid must be included. For companies with daily compensation data (HR system integration), a more precise accrual uses the actual hours worked × rates per employee.
Practitioner & Systems Framework
💻 ERP Architecture
Automated reversal journals should be set up in the ERP (Oracle, SAP, NetSuite, Sage Intacct) to automatically reverse salary accruals on the first day of the new period. HR systems integrated with payroll (Workday, Oracle HCM) can generate the exact accrual amount from actual hours worked data, eliminating estimation error. For companies with multiple pay schedules (salaried bi-weekly, hourly weekly, executive semi-monthly), each schedule's accrual is calculated separately and aggregated. Variable pay accruals (overtime, on-call pay, shift differentials) require the most judgment — use prior period run rates if current period data is unavailable.
⚠️ Audit Flags
(1) Cutoff accuracy — confirm the exact number of days worked post-last-pay-date through period-end. (2) Rate accuracy — are accrual rates consistent with current payroll registers? Post-period wage increases or new hires may need adjustment. (3) FICA wage base — for employees who have reached the $168,600 SS wage base, their accrual should not include the employer SS component. (4) Comparison of accrued wages to subsequent actual payroll — the reversal plus new period payroll should net to the new period expense only. Systematic underaccrual (accrued wages consistently below actual subsequent payroll) suggests days or employees are being omitted.
📄 Required Documentation
Payroll calendar showing last pay date and next pay date relative to period-end, payroll register for most recent pay period (gross wages), accrual calculation worksheet (daily rate × days), employer payroll tax calculation on accrued wages, reversal entry confirmation in next period, and reconciliation to subsequent payroll run.
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