Salary Due Journal Entry
Salary due is the amount of salary that company owes to the employee in any specific accounting period. Salary is the amount of expense that company needs to pay at the end of the month. Salary due is the amount that is not yet paid and recorded as a liability on the balance sheet.
Salary expense is an accounting term that refers to the salaries paid to the employees for the work completed. As accounting use the accrual basis, the company must record salary expense even the payment is not yet made. It must be included in the monthly or annual financial statement.
When the salary is not paid at the end of the accounting period, it will become a liability on the balance sheet. It is the salary due to the employees.
Salary Due Journal Entry
At the end of the month, the company needs to record salary expenses as the employees have worked for a month. The company usually pays the salary expense to the employee at the end of the month or in the first week of next month.
If the company pays the salary in the next month, it means the salary is due at the end of the month. When accountants prepare monthly reports, they have to record expenses into the incomes statement. It is aligned with the matching principle which the expense needs to record when it is consumed.
Salary due journal entry is debiting salary expense and credit salary payable.
| Account | Debit | Credit |
| Salary Expense | XXXX | |
| Salary Payable | XXXX |
Salary expenses will be present on the income statement and reduce the company profit. Salary payable is the current liability that will be present on the balance sheet. It will increase on the balance sheet and remains there until company makes payment to the employees.
When the company makes payment, they need to decrease the salary payable and cash.
The journal entry is debiting salary payable and credit cash balance.
| Account | Debit | Credit |
| Salary Payable | XXXX | |
| Cash | XXXX |
The salary payable will be decreased from the balance sheet and the cash present the cash payout to employees.
Salary Due Journal Entry Example
ABC is a consulting company which provides many services to customers. At the end of July, the company does not pay the salary to employees yet. Due to the cash flow problem, the company has delayed the payment till 15 August. The company make a payment of $ 50,000 on 15th August. Please prepare the journal to relate to the salary due journal entry.
At the end of the July, company needs to record salary expense even it is not yet paid. The company has to prepare the monthly financial statement, so they need to include all revenue and expense.
On 30 June, ABC has to record salary expense as it is expense during the month. As the salary is not yet paid, they have to record a liability on the balance sheet.
The journal entry is debiting salary expense of $ 50,000 and credit salary payable $ 50,000.
| Account | Debit | Credit |
| Salary Expense | 50,000 | |
| Salary Payable | 50,000 |
On 15th August, ABC made payment for the salary of July, so they have to reverse the salary payable and cash balance.
The journal entry is debiting salary payable $ 50,000 and credit cash $ 50,000.
| Account | Debit | Credit |
| Salary Payable | 50,000 | |
| Cash | 50,000 |