Question

You work for a large multi-national organization and the Canadian subsidiary is being spun off into a separate organization. You will need to start doing some of the accounting functions that were previously handled by the head office in London, England. You have been asked by the Controller to prepare a memo with the different monthly accruals required for the bi-weekly payroll and how each will be accrued. 

Answer 1

Memo for accrual of payroll:

Unpaid wages to be accrued bi-weekly, but the amount should materially estimate the actual costs to be incurred. Normally every company will calculate their estimates based on different purposes of this accrual.

Accrual accounting for unpaid wages for bi-weekly:

S.no	Particulars	Dr	Cr
1	Wages expenses	XXX
	Wages payable		XXX

The debit to wage expense represents the cost to the business of the calculated wages earned for the bi-weekly. The credit to accrued wages payable is booked as a current liability on the balance sheet and represents the obligation of the company to pay these payroll costs.

At bi-weekly while paying, you will need to reverse the accrual entry as follows:

S.no	Particulars	Dr	Cr
1	Wages payable	XXX
	Bank		XXX

I hope this will help you. If requires clarification , you may comment below.