In this example for the month of March 20XX, the first two weeks of worked hours fall in the same pay period and will be paid to staff on March 14th, there is no accrual. The final week of March however will be paid on April 7th, represented by the red line. The last work week of the employee incurred in March 20XX, is recorded in March 20XX to capture the true worked expense for March, even though a cash payment is not paid out. This is the payroll accrual.

To illustrate this concept numerically,

The first 2 purple lines in March represents hours worked and paid at $3,015.00

The last red line in March represent hours worked but not paid in March at $745.00

At the start of April, the accrual will be reversed for $745.00 because on April 7th when the payment is made to the employee it contains hours worked in March which was expensed in March. To avoid double counting the expense of $745.00 is reversed in April equal to the accrual in March. In april the same accrual principle is applied in the final week of april to capture the corresponding expense worked in April but not yet paid

Considering Cash Payments, Accruals and Reversals will ensure your reports and invoices capture all expenses for the applicable months.

The accrual is not an estimate or a best guess, it represents work/time incurred but not yet paid, it is an accurate representation of the salary expense for the month.

Because we follow an accrual based accounting when possible, the expense is booked into our system when the event happened not only when cash is released.

At the end of the day please include all cash payments, accruals and reversals when reporting or invoicing salary costs to your sponsors.