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How to make adjustments to specific accounts in order to comply with the Matching Principal

Brad Bergkamp's Profile

I am fumbling through closing the books for the first time (I have my own file that I can play with so I don't mess up the company financials if I were to make a mistake). [Note: I have no one here to help or teach me; that's where y'all come in :) ] My specific question is regarding Payroll. Our Payroll is processed twice a month; hours for the 1st-15th is paid on the 23rd of the month, hours for the 16th-30/31st is paid on the 7th of the following month. Matching principal says I should record the payroll for the last half of the month in that month; we currently record it on payday (so the payroll expense for the last half of a month is credited to the following month). I have solved this for future payroll: we will simply record payroll on the last day of the pay period instead of recording it on payday. For now, however, I am trying to make a journal entry to take the payroll out of April and put it into March, March to Feb, Feb to Jan, and Jan to Dec in order to get a more accurate picture of our payroll expense for Q1. To increase payroll expense (DL specifically) my current JE has a Dr. to Direct Labor but I don't know where the Cr. should go. [To reduce payroll expense for the month it'll be a Cr. to DL and a Dr. to ???] Any advice or suggestions would be greatly appreciated!!


Brad Bergkamp
Title: Accountant
Company: CC
(Accountant, CC) |

Okay, so, this is what I have come up with after thinking about it for the weekend:

Dr. Direct Labor XXX
Cr. Accrued Payroll (L) XXX

*or to decrease DL for the month/period:
Dr. Accrued Payroll (L) XXX
Cr. Direct Labor XXX

Does this sound like the proper way to account for this?
Once I make these adjusting entries the end result will be an increase of DL by (lets say) $5,000 and I'll have a positive $5,000 in my Accrued Payroll (liability) account... Next I'll have to figure out what to do with the balance in the Accrued Payroll account at the end of the year...

Any comments or concerns with my possible solution for my above question?

Imran Ali Somani
Title: Financial Controller
Company: Akhai Pharmaceuticals Pvt. Ltd.
(Financial Controller, Akhai Pharmaceuticals Pvt. Ltd.) |

okay with answer


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