Overview
This guide explains the biweekly payroll accrual process in greater detail, including how to identify biweekly payroll accrual transactions within financial reports.
As part of the monthly payroll posting process, the payroll system estimates the remaining salary and benefit amounts that biweekly employees will earn in the current month but will not post as an expense to the General Ledger until the following month. An accrual journal entry is created to record this estimated amount on the General Ledger; this estimate is automatically reversed when the actual payroll expense posts in the following month.
The use of accruals for biweekly payroll is a standard accounting practice.
Please review the information below regarding payroll accruals, calculations, transactions, and related resources.
What is the Biweekly Payroll Accrual?
The pay periods for employees who are paid biweekly do not always fall within one discrete accounting period (e.g., a single calendar month). When this occurs, an accrual journal entry is created to estimate the payroll expenses that have been incurred in one period and are not expected to post until the following period.
A reversal of the accrual amount will be posted to the General Ledger at the same time as the actual payroll expenses in the next biweekly payroll journal. Accrual entries are financial transactions recorded on the General Ledger. They can be viewed in HR and Payroll reports, such as the Distribution of Payroll Expense (DPE) Report.
The Biweekly Payroll Accrual Calculation
The accrual calculation is generated in UCPath during month-end payroll processing and is calculated as follows:
accrual base amount x ( accrual period / 10 ) = accrual amount
the accrual factor is (the accrual period / 10)
The accrual base amount is derived from current pay recorded for the last biweekly pay cycle ending in the month.
Certain pay transactions are not considered current pay and are excluded from the accrual base amount. These include:
- prior period pay transactions (e.g., retroactive adjustments)
- one-time pay transactions for accrued leave payouts and incentives
- expense transfers
- certain benefit premiums paid in advance for the month
In addition, future pay changes expected during the accrual period are not factored into the accrual base amount. For example, a pay rate increase scheduled to begin during the accrual period will not be factored into the base amount for the accrual period.
The accrual factor represents the portion of the next biweekly pay cycle that falls partially in the current month.
The accrual period is the remaining number of work days in the month after the last biweekly pay cycle. A standard divisor of 10 represents the number of work days in each biweekly pay cycle. UCSF Health business units use a divisor of 14, representing a 7-day work week, which also includes weekends in the numerator.
The accrual amount is posted at the full chartstring level at the employee level.
Example:
Scenario: Karl Fog is paid biweekly at a rate $31.32 per hour. For the pay period 8/14-8/27, Karl worked 74 hours and his current pay for this pay period was $2,317.68.
- For the biweekly pay period 8/28 - 9/10, there are three days that fall in August. An accrual journal entry will be created to estimate the August portion of the pay period (also known as the accrual period). This entry will be posted to the General Ledger in the August accounting period.
- The accrual factor to be used in the calculation is 3/10 (three days in the accrual period divided by a total of ten days for the entire biweekly pay period).
- To determine the accrual base amount, UCPath will look back to the gross salary and gross benefits (with exclusions applied) from the last biweekly pay period ending in the month (8/14 - 8/27). Karl’s current pay for this period was $2,317.68.
In Karl’s case, the accrual amount that will be generated as part of the August biweekly payroll processing will be:
$2,317.68 x ( 3 / 10 ) = $695.30- An expense accrual of $695.30 will be posted to the General Ledger as part of the August biweekly payroll journal.
- A reversal of the expense accrual and the actual payroll expenses will be posted to the General Ledger in the following biweekly payroll journal.
Notes: For simplicity’s sake, this example demonstrates an accrual calculation for salary expenses only. Accruals for biweekly payroll will also be generated to estimate corresponding benefit expenses; the calculation methodology is the same as described above.
Identifying Biweekly Payroll Accrual Transactions
Biweekly payroll accrual journal transactions will post monthly to the General Ledger as part of the final biweekly payroll journal in the month.
For each unique chartstring carrying a biweekly payroll accrual, accrual journal transactions will post to the following Accounts:
| Account | Alt Account (used in Health reports) | |
|---|---|---|
| Salary expense accruals | 50432 – Salary accrual | 61xxx |
| Benefit expense accruals | 50518 – Benefit accrual | 62084 |
Accrual and reversal transactions posting in the same month will be posted in separate journal lines. These transactions can be easily viewed in the Distribution of Payroll Expense Report (DPE) in MyReports. Accrual expenses display an A (Accrual) in the Accrual column. Reversals of the prior month’s accrual expenses display an R (Accrual Reversal) in the Accrual column.
- Campus users can run the report using accounts 50432 and 50518, or can specify a DeptID or employee, then sort or filter on the Accrual column to see accruals and reversals.
- Health users can run the report on the desired DeptID or employee and then sort or filter on the Accrual column to see the relevant accruals and reversals.
Transactions can also be identified using the Transaction Detail Report (TDR) in MyReports. Accruals and reversals are identified in the Account Description column.
Transactions can also be identified using the Transaction Detail Report (TDR) in MyReports. Accruals and reversals are identified in the Account Description column.
Related Resources
For more information about identifying payroll transactions in MyReports, review Understanding UCPath Payroll Transactions on the TDR and DPE Reports.