What is Salaries payable?

Salaries payable is a liability account that contains the amounts owed to employees that have not yet been paid.

Salaries payable is a liability account that contains the amounts owed to employees that have not yet been paid. The account balance represents a company’s salary liability as of the balance sheet date. Because such payments are typically due in less than a year, this account is classified as a current liability. A credit increases the account balance, while a debit decreases it.

When can Salaries payable be high?

The amount of salary payable can be especially high in the following circumstances:

• There is a significant gap between the pay-through date of salaries paid and the reporting period’s end; or
• The salaries of any individuals in the company (such as the CEO) are quite high; or
• The company is primarily made up of salaried employees, as is common in professional services firms such as consulting firms.
• An employee may have been fired and the severance pay

If salaries are typically paid at the end of a reporting period, a company may employ a large number of salaried employees while still not having any salaries payable at the end of that period. This is because there are no days remaining at the end of the period in which employees have earned but have not yet been paid.

Accounting professionals must only record salaries payable if their department or client uses the accrual accounting method to manage their accounts. Accrual accounting entails recording all revenue and expenses as they occur, even if employees will not receive the funds until a later date.

When a company uses the accrual accounting method, accrued expenses may differ from actual expenses once the company pays them. As a result, accrued salary expenses and salaries payable may not always be equal. For instance, if an employee unexpectedly resigns, the company’s accrued salary expense may differ from the salaries payable. This is due to the possibility that the company recorded their full salary for a pay period when they only earned a portion of it.