ACCRUED COMPENSATION Meaning and
Definition
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Accrued Compensation refers to the amount of salary or wages earned by an employee but not yet paid by the employer. It represents the accumulation of earnings for work performed during a certain time period but have not yet been received in the form of a paycheck.
Typically, when an employee works for a company, they earn their salary or wages over a specific time frame, such as a week, bi-weekly, or monthly. Accrued Compensation accounts for the hours worked or services rendered by the employee during this period, even if the payment has not been disbursed on the regular payday.
Accrued Compensation is recorded as an expense on the employer's financial statements and as a liability on the company's balance sheet until it is paid to the employee. It is an important aspect of accrual accounting that ensures accurate reporting of a company's financial obligations.
This term commonly applies to salaried employees who receive a fixed rate of pay, but it can also include additional compensation such as bonuses, commissions, overtime, or any other form of earnings. Accrued Compensation may also encompass benefits or other forms of remuneration that an employee is entitled to but have not yet received.
Overall, accrued compensation represents the earned but unpaid wages, salaries, or other forms of compensation that an employee is entitled to receive for the work they have performed within a specified period.
Etymology of ACCRUED COMPENSATION
The word "accrued" derives from the Latin word "accrescere", meaning "to increase" or "to grow". It entered the English language in the late 15th century.
The term "compensation" originates from the Latin word "compensare", meaning "to balance" or "to weigh against". It entered the English language in the late 14th century.
When combined, "accrued compensation" refers to wages or benefits that have been earned by an employee but have not yet been paid or received. The word "accrued" indicates the accumulation or growth of compensation due to the passage of time or completion of certain work, while "compensation" denotes the payment or recompense for services rendered.
