What Is the Offset Journal Entry for Accrued Payroll?
Payroll accruals are a common practice when you have payroll cycles that cross different accounting periods. You need to recognize the payroll expenses incurred during the end of the accounting period. Equally important is reversing that accrual when you issue the payroll deposits. It is important to understand the affected accounts, so that you can offset the journal entry appropriately and keep your reporting accurate.
Determine the total outstanding payroll amount for the period.
Create a journal entry that credits the payroll accrual account for the outstanding amount. For example, if you have $12,000 outstanding for payroll in the period, credit the payroll accrual account $12,000.
Recognize the payroll expense by posting the debit to the payroll expense account. In this example, debit the payroll expense account for $12,000.
Create a reversal entry when the payroll amount is paid. For the example above, debit the payroll accrual account for $12,000.
Credit the payroll expense account that was debited during the accrual process. In this example, credit the expense account for $12,000.
Account for the actual payroll payment with an entry that debits the payroll expense account and credits the ledger's cash account. This recognizes the physical cash payment.
Double-check journal entries after posting to be sure that your ledger is balanced. Verify the account balances for the affected accounts to ensure that it posted correctly.