Close payroll, leave, and operating accruals

The January 5 payroll covers ten workdays; five were worked in December. The invoice and cash dates are easy to see. The service cutoff is what the financial statements need.

Build the earned-service ledger

For each employee group, retain workdays or hours through December 31, gross pay, supplied employer payroll costs, employee deductions, amount already paid, and unpaid balance. Do not derive legal tax rates; the fictional case supplies them.

The closing entry separates gross compensation expense, supplied employer costs, amounts owed to employees, and amounts owed to authorities. A later payment clears liabilities. A reversal is an operational choice, not permission to omit the original accrual.

Read the leave plan before the HR export

The leave report lists hours. The plan answers whether those hours vest or accumulate, what service earned them, whether forfeitures are expected, which pay rate applies, and when payment is probable. Cedar Trail's stipulated vacation plan qualifies; its sick leave does not carry forward and is not included in the same schedule.

qualifying hours × supported pay rate
− supplied expected forfeiture adjustment
= compensated-absence liability

The arithmetic starts after the plan conclusion. One blended “PTO rate” can be neat and wrong.

Worked close

In the Cedar Trail example, earned payroll is $92,000, supplied employer costs are $7,200, and qualifying vacation is $31,800. The routine-accrual subtotal is $131,000. Every amount retains its evidence owner and settlement path.

Exit check

Given a leave balance, identify the five plan facts needed before multiplication. Then draft the payroll and vacation entries and explain why January payment does not change December expense.