Accrued Vacation
What is Accrued Vacation?
Accrued vacation is vacation pay owed to an employee but is yet to be taken.
![av 1](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-1.jpg)
How it Works
A business will pay its employees wages throughout the year.
![av 2](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-2.jpg)
On top of this, the business will set aside funds to cover employee vacation pay.
![av 3](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-3.jpg)
When taken, the vacation pay is treated as an expense.
![av 4](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-4.jpg)
Until then, though, the vacation pay needs to be accrued.
![av 5](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-5.jpg)
This can be done each pay period, each month, or each quarter.
![av 6](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-6.jpg)
To accrue vacation pay, you credit the accrued vacation account.
![av 7](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-7.jpg)
The accrued vacation account is a liability account.
![av 8](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-8.jpg)
Like all liability accounts, it shows money owed to others.
![av 9](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-9.jpg)
By crediting the account, you are taking value from the money set aside.
![av 10](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-10.jpg)
After this, you debit the vacation expense account.
![av 11](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-11.jpg)
This shows where the value will be used.
![av 12](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-12.jpg)
Eventually, the employee will take their vacation.
![av 13](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-13.jpg)
When this happens, you take money from checking account.
![av 14](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-14.jpg)
Then you give it to the employee.
![av 15](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-15.jpg)
Ordinarily, when the business pays for an expense, you show money came from checking.
![av 16](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-16.jpg)
Then you show where it was used.
![av 17](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-17.jpg)
In this case, though, you already recorded the expense, earlier on.
![av 18](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-18.jpg)
So now, you just need to offset the accrual.
![av 19](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-19.jpg)
To do this, you credit the checking account.
![av 20](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-20.jpg)
This shows money came from the checking account.
![av 21](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-21.jpg)
Then you debit the accrued vacation account.
![av 22](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-22.jpg)
This shows you have sent the value to the accrual account.
![av 23](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-23.jpg)
By doing this, you offset the amount that was owed.
![av 24](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-24.jpg)
Once updated, the accounts will show that money came from the bank and was used for vacation expense.
![av 25](https://seeaccountingnow.online/wp-content/uploads/2021/08/av-25.jpg)