16 BULLETIN 865, U. S. DEPARTMENT OF AGRICULTURE. 



G. ACCRUED LIABILITIES. 



Interest Accrued (G 1). 



Debit: 



Credit: 



1. With the interest accrued on notes 



1. With the interest received on notes 



receivable during the period. 



receivable. 



2. With the interest paid on notes pay- 



2. With the interest accrued on notes 



able. 



payable during the period. 



The above method is believed to be advisable for smaller concerns, however. When 

 the amount of interest accrued on either notes receivable or notes payable is consider- 

 able, it is suggested that separate accounts be opened for each of the above items, 

 showing Interest Accrued and Notes Receivable as an asset, and Interest on Notes 

 Payable as a liability. (See also discussion under Interest, p. 30.) 



Payroll (G 2). 



Debit: 



Credit: 



1. With all amounts paid to employees 



1. With the amount of unpaid labor as 



for services, including advances. 



shown by the Balance Sheet at the 





time of opening the books. 





2. With the amount of the pay roll, 





including all advances, at the close 





of the period, as shown by the time 





sheet. 



It is necessary to include all employees on the pay roll regardless of the department 

 in which they are employed. The following Journal entry, which should be made at 

 the end of each period, will illustrate the operation of this account. Example: The 

 entire pay roll is $400 and §20 has been advanced during the period. 



JOURNAL ENTRIES. 



Debit. 

 $135 

 265 



Credit. 



Factory Labor. 

 Office Labor. 



380 Payroll. 



Payroll $400 



(For periodical pay roll.) 



380 



P>ank Account 



(For payment of periodical pay roll.) 



Inasmuch as the $20 was charged to the Payroll account at the time the advance was 

 made, the credit of $380 to the Bank Account will close the Payroll account. 



Occasionally an employee may desire an advance on his labor account, in which case 

 the Payroll account should be debited for the amount advanced. It is not considered 

 advisable to carry Ledger accounts with employees because of cash advances, but very 

 careful note should be made of such advances to prevent duplicating the payment. 



Should an employee purchase merchandise, the sale should be charged to his per- 

 sonal account. At the end of the period, or whenever the pay roll is made up, a check 

 should be drawn in favor of the employee for the full amount of his wages. The em- 

 ployee should then settle his account in the regular way. By following this procedure 

 the records will reflect clearly the transactions involved. 



