USA Accrual of a payroll item

[ADDISION]

Its is customary for us to hand out payroll checks prepared by an outside payroll company a day before the pay date.

We handed out the paychecks on January 31st for a February 1st pay date and our bank cleared some of the presented checks on the 31st.

These show on the bank statement as of the 31st of January. I do not want them to show as paid in January for my financial statements, I would like them to be February.

When I do my journal entries and bank reconciliation how do notate and make sure the amounts are considered for February?

Do I do an adjustment to the January accounts and then a reversing adjustment in February? or do I just do the Journal entries as normal and make a note on the bank statement.

 

[Steve-LevelUp]

If it is not a year end, then I would just leave them as a reconciling item on the January bank rec. They would be withdrawals showing as not posted. These could clear during the Feb reconciliation. This ensures that you fairly disclose it (its on the rec) without causing a bunch of entries.

if you want to book an entry, then you can book it as follows.

Dr. Prepaid salaries
Cr Cash
Reverse on Feb 1.

This would keep all of your original payroll entries correct while reflecting the pre-payment of wages.

 

[kirby]

Time out.
What period of time were the checks paying?
If it was for work performed in January, then the payroll expense belongs in January.

 

[Steve-LevelUp]

oh my...I can't believe I missed that consideration...

 

[King Sitaw]

Accruals of payroll item.This means that the item was already incurred and will be paid in February. Principles in accounting suggest the matching principle where the time of revenue was recognized at the same time its corresponding expenses. Therefore, since the payroll item was incurred in January, the same will be recorded in January.