There are a number of different accounting terms you need to know about when you are managing the finances of a particular company or organization. One of those terms that you need to know about is wages payable. If you are interested in learning what are wages payable, then you can easily use this guide to understand everything about them. So, get ready to brush up on your information on wages payable and how they are used in the finances of an organization. 

Basic Definition of Wages Payable 

Well, the first thing that you need to know is that wages payable are the liability of any organization, as they are the wages earned by the employees working for the company, but are not paid to them yet. This means that this is the money that is yet to be paid to the employees of the company. So, if you are questioning: are wages payable current liabilities, then the answer to this is yes, as this money is owed to the employees of the organization. 

Another important thing that you need to know is that this amount is typically removed early in the reporting period, when the wages are paid to the workers. After this, a new wages payable liability is created for the following period. 

Journal Entries for Wages Payable

Wages payable involve two main journal entries. First, you record the accrued wages when employees have worked but haven’t been paid yet. You debit wage expense and credit wages payable. Second, at the start of the next reporting period, you reverse that accrual before running the regular payroll. So, you debit wages payable and credit wage expense.

Are Salaries Included in Wages Payable?

If a business pays employees their salaries right up to the end of a reporting period, there’s no wages payable liability. Salary payments cover exactly what employees have earned, so nothing is left unpaid.

What is an example of wages payable?

If a particular company is paying its employees for every hour on the last business day of the month, then the company needs to process the payroll through the 26th of the month. This means that the last five days will not be counted in the payroll of the present month, and they will be carried forward to the next month. Whatever the amount may be, it will be recorded as a debit to wage expenses and a credit in the wages payable liability section. 

Presentation of Wages Payable

Wages payable sit under current liabilities because companies usually pay them within a year. You’ll see it near the top of the liabilities section on the balance sheet. Sometimes it’s lumped in with “Other Current Liabilities.” On rare occasions, if payment isn’t due for more than a year, it appears under long-term liabilities.

How do Wages Payable Differ from Accrued Payroll?

Wages payable only cover the unpaid wages employees have already earned. Accrued salaries and wages go further; besides unpaid wages, it also covers things like payroll taxes, bonuses, commissions, and benefits. So, wages payable are just one piece of the bigger accrued payroll puzzle.

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