Account Debit Credit Salary Expense 11,000 Cash/Salary payable 11,000 Please prepare the journal entry for the January salary expense.Īs the company makes payment at the end of the month, so they can make journal entry by debiting salary expenses and credit cash of $ 11,000. It increases from prior month due to new staffs. On 31 January, they pay a salary expense of $ 11,000. They usually pay the salary at the end of the same month. Every month they need to spend around $ 10,000 on the salary expense. Journal Entry for Salary Expense ExampleĬompany ABC employs many staffs to work in various departments. The salary payable will be reversed when company pays cash to the employee. If the payment is made in the following month, they can use the salary payable account. The company will record cash if they paid the employee on the same date. Salary expense will impact the income statement and similar to other expenses it will reduce the company profit. Account Debit Credit Salary Expense $$$ Cash/Salary payable $$$ It is not necessary to wait for the cash payment.Īt the end of the month, the company should make journal entry by debiting salary expenses and credit cash or salary payable. As we know, the recording in the financial statement is based on the accrual basis, so the revenue and expenses must record regarding their occurrence. Journal Entry for Salary ExpenseĬompany records salary expenses in the monthly income statement regardless of the payment. And it is the big part of the expense for most of the company which will present in the income statement. For a small company, the payment process can be handled by the accounting department or the owner himself. This expense is managed by the humane resource department for a big company. In general, the total salary that the company paid to employees is mostly fixed, it only a small change due to new recruit or staff resign. Some employees may be promoted to a higher position which is a higher salary as well. The salary is mostly fixed from month to month, however, the company can increase it once per year to motivate the employee to work harder and achieve higher targets. The company needs to pay fixed monthly expenses unless there are bonuses or increments. In exchange for their services, company needs to pay the monthly salary based on their work complete and level of competency. The company usually recruited employees to work in various departments such as sales, production, accounting, and so on. Salary is the expense that company paid to the employees in exchange for employment over a period of time.
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