Is Salaries Payable a Liability?

Salaries Payable are the liabilities which the company owes to the employees at the end of the accounting period. It should be classified as the current liabilities as the company expected to make payment within a month. It is almost impossible for the employer to owe salary payment for more than a year. Usually, the salaries payable will be paid within a month after the balance sheet date.

Some companies keep paying their employee at the beginning of the month, it will be a liability at the end of the previous month. For example, January’s salary will be paid on the 5th of February. So there must be salaries payable balance at the end of January. The balance of salaries payable will be cleared when salary paid on 5th February. And it will happen again at the end of February.

Salaries Payable Vs Accrued Salaries

Accrued Salaries are the liabilities company owes to the employee regarding their service, however, the amount is not finalized so management estimate it and records it as accrued salaries rather than salaries payable.

Salaries payable is record when company knows the exact amount which needs to pay to employees. Accrued salaries payable is record when the company does not exactly amount and make the best estimation. It can be different from the paid amount due to over and under accrued. Accountants need to record accrued salaries expense to follow the matching principle, expenses are recorded when occur even payment not yet made.

Salaries Payable Vs Bonus Payable

Bonus Payable is the liabilities that company owe to employee regarding their annual bonus. Most companies will pay bonus after annual closing, the bonus will depend on company performance. So they usually are paid at the beginning of new accounting period. So at the end of accounting period, the bonus payable is always presented on the company balance sheet.

Is Salaries Payable a Debit or Credit?

Salaries payable are the current liabilities so it increases on the credit side of journal entries and decreases on the debit side.

For example, Company ABC records the salaries payable of $ 10,000 at the end of the month and make a payment on the 5th of next month.

  • At the end of the month journal entries to record salaries payable should be:
Account Debit Credit
Salaries Expense 10,000
Salaries Payable 10,000
  • On 5th next month, the journal entries to make payment of salaries payable
Account Debit Credit
Salaries Payable 10,000
Cash 10,000