What are accrued salaries?

Accrued salaries refer to the salaries that have been earned by employees for work they have already completed, but have not yet been paid out. This typically occurs at the end of an accounting period, where the company recognizes that it owes money to its employees for the services they have rendered during that period, even though the actual payment will occur later.

This accounting concept aligns with the accrual basis of accounting, which states that expenses must be recorded when they are incurred, not necessarily when they are paid. Thus, classifying accrued salaries as the salaries paid after the service has been performed accurately captures this idea, as it recognizes the obligation to employees before the financial transaction actually takes place.

In contrast, pre-paid salaries or bonuses do not fit the definition of accrued salaries, as they would involve payments made in advance or after specific performance metrics. Thus, they do not represent an obligation incurred but rather a payment structure that doesn't relate to the immediate recognition of earned wages.