Salary is one of the most common expenses recorded by your business every month. But there is a gap between the time employees earn their salary and the time the business actually pays it. For example, your employees might earn their salary for March but the company might process the payment in April. In this situation the salary needs to be recorded as an expense for March, while the unpaid amount remains a liability until it is paid.
This is where salary payable becomes important. It records the amount earned by employees but not yet paid by the business.
If you use TallyPrime for accounting and payroll, you can record salary accrual through the payroll voucher and use the appropriate salary payable account or pay head for the outstanding amount.
What is the salary payable?
Salary payable is the amount a company owe to its employees after salary has been accrued but before it has been paid.
Suppose a company incurs ₹5,00,000 in salary expense for March but plans to make the payment in April. The salary expense is debited by ₹5,00,000 and the salary payable account is credited by ₹5,00,000.
The salary expense is recognised, while the salary payable represents the amount that is still due to employees. Once the salary is paid, the salary payable balance is debited and the corresponding amount is credited to the Bank or Cash account.
Salary payable journal entry example
A company has salary expenses of ₹3,00,000 for March. The company will pay staff in April.
The salary accrual is:
Salary A/c Dr. ₹3,00,000
To Salary Payable A/c ₹3,00,000
This records the salary expense and creates a liability.
When the salary is actually paid through the bank:
Salary Payable A/c Dr. ₹3,00,000
 To Bank A/c ₹3,00,000
How to create a salary payable pay head in TallyPrime?
Before recording salary accrual, TallyPrime requires the appropriate salary payable ledger or pay head to be set up.
You can create it by going to Alt+G → Create Master → Pay Head
Then enter the required details.
For example:
Name: Salary Payable
Pay Head Type: Not Applicable
Under: Current Liabilities
How to record salary accrual in TallyPrime
Once the Salary Payable ledger is ready, you can record salary accrual.
Open the payroll voucher
In TallyPrime, go to Alt+G → Create Voucher → Ctrl+F4 (Payroll).
Use Payroll Autofill
Press Ctrl+F to open the Autofill screen.
Under the transaction details:
- Select Payroll Autofill as the type of transaction.
- Select Salary under Process for.
- Enter the applicable From and To
- Select the relevant employee, employee group or category based on your payroll setup.
Select the salary payable account
Select the Salary Payable account configured for recording the accrued salary. This ensures that the salary expense is recorded while the unpaid amount is recognised as a liability until the payment is made.
The salary payable account should be set up before recording the salary accrual so that the unpaid salary can be recognised as a liability.
Check the salary details
Before saving the voucher, you need to review the employee details and salary components. Depending on your payroll setup, salary may include different earning and deduction pay heads. Once everything is correct you can enter a narration if required and press Ctrl+A to save the voucher.
How to Record Salary Payment After Accrual
The payroll accrual does not mean that the employees have already been paid. The next step is to record the actual salary payment. TallyPrime allows you to record the payment of accrued salary through a payment voucher. When recording the salary payment, the amount can be automatically filled from the Salary Payable account, after which the Bank or Cash account can be selected for payment.
To record it:
- Open the Payment Voucher.
- Use the Ctrl+F (Autofill) option.
- Select the Salary Payable ledger used for the salary accrual.
- Select the Bank or relevant payment ledger.
- Check the payment details.
- If required, provide employee-wise bank allocation details.
- Press Ctrl+A to save the voucher.
What if business follows cash accounting
Not every business follows the same accounting method. TallyPrime explains that if you are following the accrual method then you can record salary accrual first and then make the salary payment. If the business follows the cash method it can directly record the salary payment without creating an accrual entry.
Salary Payable with Deductions
In actual payroll processing, salary may include several components and deductions.
For example, payroll may involve:
- Basic salary
- Allowances
- Employee PF
- ESI
- Professional Tax
- TDS
- Other applicable deductions
You must know that TallyPrime’s payroll system supports different earnings and deduction pay heads and can also handle statutory components like PF or NPS depending on the application setup. So this means the salary payable amount does not always have to be the same as the gross salary.
Salary Expense vs Salary Payable
| Salary Expense | Salary Payable |
| Expense incurred by the business | Amount owed to employees |
| Recorded as an expense | Recorded as a liability |
| Affects the Profit & Loss Account | Appears as an outstanding liability |
| Recognised during salary accrual | Cleared when salary is paid |
Conclusion
So you need to know that the salary payable journal entry in TallyPrime becomes easier once you understand the two stages involved. First the salary is accrued then it is paid. If you are using TallyPrime’s payroll feature the official workflow involves creating the salary payable ledger, processing salary through the payroll voucher and then recording the payment through the payment voucher.
Read More:
How to Set Up Payroll in TallyPrime: Step-by-Step Guide
Vouchers in TallyPrime: Types, Use Cases and How to Create
FAQs
What is the salary payable journal entry in TallyPrime?
The basic accounting treatment is to debit salary expense and credit salary payable when salary is accrued.
How do I create a salary payable ledger in TallyPrime?
In TallyPrime, go to Alt+G → Create Master → Pay Head and create the required Salary Payable pay head. Enter the name, select Not Applicable as the Pay Head Type and select Current Liabilities under the appropriate group.
How do I record salary accrual in TallyPrime?
In TallyPrime, go to Alt+G → Create Voucher → Payroll and use the Autofill option where applicable. Enter the relevant payroll period and employee details, review the salary components and select the configured Salary Payable account for the accrual.
How do I record salary payment after accrual?
You can open a payment voucher, select the salary payable ledger used for the accrual and then select the bank or cash ledger for payment.
Can I directly record salary payment without salary accrual?
Yes. Under cash-basis accounting, salary expense is generally recognised when payment is made, so a separate salary payable accrual may not be required. Under accrual accounting, salary earned but unpaid is recorded as an expense and liability before payment.