Unpaid leave as a liability

SabrinaM

I accounted for unpaid leave for the first time last year, charging (debit) a new code under the P&L accounts and accruing the amount (credit) under the balance sheet.

However, I am wondering what will happen this year when I reverse the accrual. The accrual will be debited and cancelled but against what do I credit the unpaid leave?

Many thanks for any help.

Matt_pun

Hi Sabrina,
it would be reversed on the same code in the P&L showing a credit on that account for the current financial year.

However in my opinion, If this is a liability for unpaid holiday at year end vs the company holiday accrual period, I would keep the liability on the balance sheet each year and then post a journal based on the current year end amount, either increasing the liability or reducing depending on amount of holiday not taken by the year end.
However that would be based on what’s best for company and how they want to show there ongoing liabilities.

SabrinaM

Please accept my apologies Matt for not responding sooner. Thank you so much for your clear response. Much appreciated.