Glossary
Payroll

Payroll Accrual

By: Alec Hollingsworth
Updated:  
June 16, 2025

DEFINITION:

Payroll accrual records compensation and related costs owed to employees but unpaid at the end of an accounting period.
Payroll accrual is the accounting process of recording wages, salaries, payroll taxes, and other related costs that have been incurred by an organization but have not yet been paid by the end of an accounting period. This ensures that all payroll expenses are reflected in the financial statements for the correct period, even if the actual payment to employees occurs in the next period. Payroll accruals include not only regular wages, but also overtime, bonuses, and payroll taxes owed. Proper payroll accrual allows organizations to match expenses with the revenues they help generate, providing a more accurate picture of financial performance.

Key Takeaways

  • Records unpaid payroll expenses at period-end
  • Ensures financial statements reflect all earned labor costs
  • Includes wages, taxes, and benefits owed

Why It Matters

Ensures accurate financial reporting by matching payroll costs to the correct period.

Real World Example

A nonprofit pays employees every two weeks. The last pay period ends on December 29, but the actual payment will be made on January 2. To ensure December’s financial statements are accurate, the organization records a payroll accrual for the wages and payroll taxes owed for the days worked in December but not yet paid. This accrual is reversed in January when the payment is made. This process ensures that the financial statements reflect the true costs of labor for December, even though cash does not leave the organization until January.

How Aplos Helps

In Aplos, payroll accruals can be tracked as journal entries or within your chart of accounts. This helps nonprofits and churches ensure that all salary and wage expenses are properly recorded, even if payroll is processed after the period ends. Aplos makes it simple to record and reverse accrual entries, keeping your financial statements accurate and audit-ready.
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Frequently Asked Questions

What is included in payroll accrual?

Payroll accrual includes all compensation earned by employees but not yet paid by the end of an accounting period, such as wages, salaries, bonuses, and related payroll taxes or benefits owed.

Why is payroll accrual important for nonprofits?

It ensures that financial statements accurately reflect all payroll expenses, supporting transparency and compliance with accounting standards.

How does Aplos handle payroll accruals?

Aplos allows users to record payroll accruals as journal entries and reverse them when payments are made, making reporting and auditing easier for nonprofits and churches.

Related Terms

Segregation of Duties
Unrestricted Fund
Net Asset Classification
Deferred Revenue
Accrued Expense
UBIT (Unrelated Business Income Tax)

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