Outstanding Salary Journal Entry
Outstanding salary is an accrued expense that is recorded at the end of an accounting period in order to reflect the amount of salary that is owed to employees.
Accrued salaries are recorded in the books of accounts regardless of whether or not the payments are made at the end of the period. At the end of the accounting period, the company records the expense of the unpaid salaries in the books of accounts in order to reflect the amount of salary that is due to employees.
To record the outstanding salaries, the company debits the salaries expense account and credits the liabilities account. This is done in order to recognize the liability of the company to pay its employees for the services rendered during the accounting period.
The journal entry for outstanding salary is recorded in the books of accounts at the end of every month in order to accurately reflect the financial position of the company.
Outstanding Salary Journal Entry
At the end of the month, the company needs to quantify all expenses and revenue to include in the income statement. If there is some work that employees have completed, they need to accrue the expense. This is known as an outstanding salary journal entry.
The outstanding salary journal entry is debiting salary expense and credit accrued salary.
| Account | Debit | Credit |
|---|---|---|
| Salary Expense | XXX | |
| Accrued Salary | XXX |
This type of entry is recorded to ensure that all payroll expenses are properly accounted for in the accounting records. Salary expense is presented on the income statement and accrued salary is recorded liability on the balance sheet.
When the company makes the payment, it will reverse the accrued salary. The journal entry is debiting accrued salary and credit cash.
| Account | Debit | Credit |
|---|---|---|
| Accrued Salary | XXX | |
| Cash | XXX |
Example
Company ABC has employed many workers to complete the work for clients. The salary will be paid during the first week of next month. At the end of the month, company calculated the outstanding salary which cost $30,000. Company is preparing monthly financial statements, so they have to accrue salary expenses in the income statement. Please prepare journal entry for outstanding salary.
By making the necessary journal entry, the company can ensure that all payroll expenses are properly accounted for and reflected in the accounting records.
The journal entry is debiting salary expense $ 30,000 and accrued salary $ 30,000.
| Account | Debit | Credit |
|---|---|---|
| Salary Expense | 30,000 | |
| Accrued Salary | 30,000 |
This journal entry will result in an increase in Salaries Expenses and an increase in Accrued Salaries. This will enable the company to record the expense of the outstanding salary and the liability that is due to an employee. The journal entry will also ensure that the company’s payroll expenses are properly recorded in the accounting records.