Accounting entries for salaries and wages: what they are and how they are prepared.

Accounting entries for salaries and wages what they are and how they are prepared.

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Any employee who works in an establishment must provide the experience and skills he possesses in order to contribute to achieving the establishment’s goal. He works there during a specific and agreed-upon time, and in return, the institution’s policies determine his salary or wage, which is due to him on a specific date. To calculate this type of transaction, accounting entries for salaries and wages are used, but how can these entries be made and their mathematical accuracy be guaranteed? Why should we abandon paper books and resort to an electronic accounting system when donating and organizing them? This is what we explain in detail in our article.

What are the accounting entries for salaries and wages?

Salaries or wages are financial entitlements that an employee receives from the organization in exchange for his work there during a specific period. These salaries come from a variety of sources, including additional salaries, incentives, bonuses, insurance, and so on. They may also include deductions, whether continuous or added in certain circumstances only. Accounting entries for salaries and wages represent a regulatory process that calculates these salaries, adds excess items, and deducts various deductions.

Therefore, it is evident that the accounting entries for salaries and wages organize financial values in paper or electronic records, aiding in the calculation of each worker’s salary and its due date within the organization. It encompasses the advances and deductions made from it, the additions the employee receives, and other factors that contribute to an increase or decrease in their salary.

Salaries entries are part of institutions’ financial statements, and in the past they were recorded in the “ledger,” but now they are recorded electronically through the Qoyod accounting system, where the values are recorded twice a day. The existence of a credit and debit account is crucial for this type of entry, as it adds sums of money withdrawn from other accounts, necessitating the recording of this process on a reliable, safe, and accurate system.

The difference between salary expenses and wage expenses

Though they may look alike, salaries and wages are different. In the following table, we explain how salary differs from wage in many ways:

Comparison Salary wages
the definition An amount of money paid by an organization in exchange for an employee’s work there. An amount of money paid by the organization in exchange for the employee’s work.
Due date Periodically (typically every month),. It is payable only if the employee provides a service or product to the organization.
Continuation It is a stable source of income. As long as the employee provides work for the organization, he deserves remuneration. If he does not provide anything, he will not be paid or required to attend.
The amount of money After subtracting deductions and adding basic sources, the percentage remains fixed, albeit slightly varying. Variable depending on employee productivity.

How are accounting entries for salaries prepared?

Books that organize accounting operations, which include basic salary items and rely on periodic recording for their accounts, prepare accounting entries for salaries and wages.

  • Entitlement.
  • Withholding. 
  • Salary disbursement.

To enable the smooth use of these processes for all employees of the facility, the following steps must be adhered to:

  • Preparing comprehensive lists of all the organization’s employees, indicating their financial grades, working hours, and the departments in which they work.
  • Add salary items for each employee.
  • Determine the attendance and departure times of each worker throughout the month.
  • If there are any deductions recorded for employees, they must be recorded, and then salaries for each individual must be calculated.
  • Salary entitlement, deductions, and salary payment entries must be filled out to proceed properly with the process.

The following is a simplified way to explain the salary entitlement entry or the additional entry that records additions:

Due date Statement Debt Creditor
27 Jumada al-Akhirah deserved wages 200 thousand Saudi riyals  
  Basic   135 thousand riyals.
  Call allowance   10 thousand riyals.
  Transfer allowance   25 thousand riyals.
  Extra work   30 thousand riyals.

This entry shows the total salaries owed to the organization’s employees, which amounts to 135 thousand riyals, without taking into account deductions, advances, and applicable deductions. At the same time, working hours, allowances, etc. have been calculated in this entry.

 As for recording deductions, they are entered in other boxes, which are as follows:

Due date Statement Debt Credit
27 Jumada al-Akhirah Salaries 200 thousand riyals  
  Deductions   25 thousand riyals
  advances 20 thousand riyals  
  Penal Deductions 7000 riyals  
  insurance 15 thousand riyals  

This entry is added to the accounting entries for salaries and wages to clarify the reason for the decrease or increase in salary, in addition to enabling the specialist in the institution to follow up on what entered its accounts and what came out of them, because, as we mentioned, what is added to one account is deducted from another account.

Disbursement entry:

the date Statement Debt Credit
27 Jumada al-Akhirah Total entitlements in salaries and wages 200 thousand riyals  
  Wages   110 thousand riyals
  Deductions   25 thousand riyals.
  Extras   65 thousand riyals.

Periodically, we pay and use the salary under this entry.

An example of registering salaries and wages

As previously explained, the monthly salary record in Saudi riyals for all employees of the organization takes the following form:

the name Salary General Deductions   Allowances Net salary
Absence Today’s wages Special Deductions  
Fines Insurances Loans Total Deductions    
a. F 22 thousand 0 733 0 400 500 riyals 900 400 21500
KH 18 thousand 1 600 200 300 0 500 350 17250
M. g 17 thousand 3 566 300 300 0 600 350 15052
H. s 15 thousand 2 500 250 250 700 1200 300 13100
B. Sh 13 thousand 0 433 300 200 250 750 300 12550
Total 85 thousand 0 2832


1050 1450 1450 3950 1700  79452

Types of advances that employees receive

Sometimes, an employee may have to request an advance for himself, which is part of his salary that he receives before the due date. When the due date arrives, they deduct it once more, and the employee receives their salary less the advance amount. But the employee may also receive an advance to complete his work, and then it will be paid. Differently, the employee does not bear the responsibility for payment in this scenario. There are various types of advances, including the following:

Advance according to time.

Is it requested in specific amounts, and is it called temporary or permanent according to the period during which it is paid or according to the need for it by the institution? Its types are:

Permanent advance

They are small amounts that are disbursed to the competent employee from the organization’s accounts department on an ongoing basis for specific purposes, and they are compensated at later dates, whether their full value or part of it is deducted every month. They are related to the operation of the business and are spent on parties that do not need large financial capacity. If it is an advance to the employee himself, it requires paying part of it every month from the salary until it is fully recovered.

Temporary advances

These are the amounts that an employee receives to complete a specific job once, or that he obtains for himself before the salary is due due to his own circumstances. They are neither continuous nor permanent, and they are compensated on the date of receiving the salary.

Advances according to purpose

The employee often obtains it for himself, and the payment period is longer or shorter depending on its value in relation to the employee’s salary. It is divided into several types, including:

  • Travel advance.
  • Marriage advance.
  • Delegation advance.

 How to process salary entries with advances

If we assume that an employee (KH) received a temporary salary advance in the amount of 700 Saudi riyals, the accounting treatment will be according to the following table:

Payment destination Payment required Statement
  700 riyals From/temporary advances
700 riyals   To/Treasury

Therefore, we pay it at the end of the month by deducting it from the employee’s salary or, if it’s an advance for the continuation of work, from the temporary advance account.

If the advance is permanent, it requires repayment over more than one month, and then it is treated as follows:

If the employee (KH) takes an advance of 5,000 riyals from his salary, it will be distributed over the following months according to the company’s policy, and here he cannot be allowed to pay for a period longer than 6 months (hypothetically), so the accounting restrictions for his salaries and wages are as follows:

Statement Payment required Right side
From / receivable (k-e) 5000 riyals  
To/Treasury   5000 riyals

Here, the form of its exchange entry is as follows:

the name accruals Deductions net salary
  basic salary Allowances Total Permanent advance Temporary advances Total  
k.H 4000 riyals 1000 riyals 5000 riyals 833.5 riyals 700 riyals 1533.5 riyals 3467 riyals

How does the Qoyod accounting program assist in calculating salaries?

The Qoyod accounting system helps you record accounting entries for salaries and wages and calculate the salaries of your company’s employees with complete ease and reliable accuracy. It helps you list all your accounting operations easily while mentioning additions and deductions clearly and transparently by following the following steps:

  • Go to the Qoyod accounting program from here.
  • From the side menu that appears, choose “Salaries,” and then click on Activate Features.

الرواتب والأجور فى برنامج قيود

  • You will find an interface that includes details of employees’ salaries and deductions imposed on them, in addition to bonuses, incentives, etc. Fill it out in accordance with the regulations of your company.
  • After that, click on Settings from the side menu.

الإعدادات فى برنامج قيود

  • Choose Payroll Settings.

اختر إعدادات الرواتب

  • You will find an interface through which you can specify how to calculate time, payment value, and salary. Choose the salary components and click the edit mark next to them.

حساب الوقت وقيمة الدفع والرواتب

  • After clicking on edit salary settings, start selecting the options therein according to your organization’s management.

تحديد الخيارات فيها حسب إدارة منظمتك.

  • If you need to add a new account for expenditure entities or an increase in your employees’ salaries, you can do so by returning to the Payroll section from the side menu and clicking on Add Account.
  •  You can also do this by going to the accounts section and, from there, going to the account tree and choosing to add a new account.

قسم الحسابات ومنه إلى شجرة الحسابات

  • Return to the payroll components and choose the due salaries as a credit account. As for the direct cost, you must choose salaries and wages.
  • In the indirect cost item, we will click “Salaries Account” from the available options. However, if the organization provides its employees with bonuses, they will be listed in the rewards item under the title “Commissions and Bonuses.

The deduction items imposed on employees, whether insurance, taxes, or other items, are then clarified. To create an electronic book capable of calculating all transactions related to their salaries. Discover the benefits of the Qoyod Accounting Program I Payroll, which provides a comprehensive guide on implementing the book of accounting entries for salaries and wages simply and straightforwardly.


We gained knowledge about the definition of accounting entries for salaries and wages and the techniques for executing them in files and via the electronic accounting system. All you have to do now is move to the Qoyod accounting system to benefit from the free trial for 14 days and various packages that suit you and provide you with many benefits. It is a reliable, professional system that does not require installation on your devices and works with unprecedented efficiency, so try it now and benefit from all the services available to your company and track your investments.

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