Wednesday, December 03, 2008

December 2008 Accounting Tip - Payroll Accruals

I just got this from one of my many newsletters and wanted to pass it along to those of you who do your own bookkeeping. It comes to us from AIPB (American Institute of Professional Bookkeepers).

The last day of 2008 is Wednesday, December 31. The first day of 2009 is Thursday, January 1. If your company is on the accrual basis, GAAP requires accruing an expense in the year it is incurred.

Thus if you pay employees for the last week in December on Friday, January 2, you must book Monday-Wednesday (Dec 29-31) as 2008 wage or salary expense and Thursday-Friday (Jan 1-2) as 2009 wage or salary expense.

Example:
Your company's workweek is Monday-Friday, your payroll is $25,000, and you distribute your payroll on Fridays. How do you book your payroll for the last week of December 2008?

On Wednesday, Dec. 31, 2008, record the journal entry to accrue wage expense for Monday-Wednesday (Dec 29-31, 2008). This expense will be 3/5, or 60%, of that workweek.

To compute this amount:
$25,000 weekly payroll x 60% = $15,000 accrued payroll expense for 2008.

For the journal entry, contact me and I'll send you the journal entry.

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posted by The Office Grapevine at 7:27 AM 0 comments