I am working out closing the year-end and I've calculated my employee's accrued and used vacation amounts. I need to make journal entries to show accrued, unused vacation as a liability, but am unsure of what accounts to debit/credit. I do have my payroll items mapping Vacation hours employees have used to an expense account, so I am able to see how many vacation hours were paid out.
So in the payroll system you are expensing vacation as it is used without accrual, but for the year-end you want to change to an earned(accrued) method.
Assuming you have correclt figured out all the accruals and entitlements, then all you need to do is adjust the 'unused vacation payable' liability account to the correct year-end balance. The other side of that post will be to the 'vacation pay' expense.
You will have to do this by Journal Entry.
It matters Where you are located.
For QB for Canada, this has to run through Payroll, because they are required to see the accrued time as a Cost, too. You cannot use a JE for this.
For QB for US, you won't have this requirement, except, I believe the tax table was updated to include this for some States that require it.
Look here for a Topic that shows the two different Images for this difference:
I an in Montana, and my governmental clients must show Accrued Value and Time, but they are not Linked. The Value to accrue as liabilty is All of vacation and 1/4 sick, for example. We rebalance at each fiscal year end using JE. The Counters for sick and vacation are populated through the Payroll Setup functions. Canada has both of these in that one Payroll function.
I have the amounts calculated, I just want to show it on the balance sheet. I just need to know what account is on the other side of my "Vacation Accrued" liability account to post the second half of the journal entry.
Like, as my vacation accrued increases, what account decreases to balance it out?
It's tracking a future expense. Each pay period employees accrue vacation hours (an amount determined by rank & longevity), I'd like to show those accrued hours as a liability until they're cashed in, when I can show them as a true paid out expense. Unless I'm very off track here?
"It's tracking a future expense."
Yes, that is what I answered, too.
No, it's not like this: " I'd like to show those accrued hours as a liability until they're cashed in, when I can show them as a true paid out expense."
If you are Allowed or Required to accrue, you pay out the Liability. You don't pay out "true" expense, because you already reported and posted Expense, as the offset of that Liability.
At the end of year 1, we show $500 payroll vacation expense and as liability.
In year 2, the staff accrued $500 more of vacation expense but also Takes some. So, the Liability has gone down. Now you accrue the Difference, which might increase or decrease both Expense (the Debit) and Liability (the Credit). It's a rebalance, but Actual Payments are from Liability.
Are you "wanting" to do this or Required? Because "wanting" doesn't make it right for your accounting.
Why not T/U monthly?
In year 1, I didn't have a balance, but now I do, so it's a $40K liability I have by the end of my Fiscal Year.
I don't think I should debit the entire amount, thoughts???
I'd be curious about a response to this recent post as well. At the end of last fiscal year, we had a large liability (long story). The auditor created an AJE that debited the expense (salaries) and credited the liability (what we call accrued compensated absences payable).
My leadership would now like to have this adjustment at the end of every month. This is where I get confused! Can I (should I) debit the "real" expense for this liability? Hope this makes sense!