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What are wages payable?

Wages payable refers to the wages that a company's employees have earned, but have not yet been paid. Under the accrual method of accounting, this amount is likely recorded with an adjusting entry at the end of the accounting period so that the company's balance sheet will include the amount as a current liability. (The adjusting entry typically debits Wages Expense and credits Wages Payable.)

To illustrate wages payable we will use the following hypothetical dates and other information. Jane is an hourly-paid sales clerk at a company that ends its accounting year on December 31. During the work week of Sunday December 22 through Saturday December 28 Jane earned $400 of wages that the company will pay to her on the January 2. For the last three days of the year (December 29-31) Jane earned $160. This amount (plus any wages she earns from January 1-4) will be included in her January 9 paycheck.

Given this information, the company's current liabilities on its December 31 balance sheet must include the $560 ($400 + $160) that Jane had earned and the company owes as of December 31. (The company's income statement for the year that ends on December 31 must also include the $560 in its wages expense.)

The amount in Wages Payable (or Accrued Wages Payable) will often be reported on the balance sheet as part of a current liability description such as accrued compensation, accrued payroll liabilities, accrued expenses, accrued liabilities, etc.