Journal Entry

by Nora
(Fort Worth, Texas)

Question: Wages owed but not paid at Dec 31 was for $500


Is it:

Wage Payable 500
Wage Expense (500)

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Hi Nora!

I'm assuming you're not using the straight Cash Basis, as you're accruing an expense.

In that case, you're just about right on. You've incurred a Liability (wages payable) because you owe the money to an employee, but you've also incurred Liabilities to all the taxing authorities on this payroll, like your 941 tax deposit (Federal withholding and Social Security/Medicare taxes), state withholding, local withholding, etc. Post those as Liabilities too, and lower your entry to Wages Payable to reflect the net pay (after deductions).

Hope that helps!
Kathy

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