Definition: A payroll journal entry is a method of accrual accounting, in which a business records its debit and credit payroll transactions pertaining to employee compensation. A payroll journal entry includes employee wages, direct labor expenses, FICA expenses, payroll taxes, and holiday, vacation and sick days in the Debit section.

The initial journal entry of an accrued wage is a “debit” to the employee payroll account, with the coinciding adjustment being a “credit” entry to the accrued wages account. Employee Payroll Account → Debit Accrued Wages → Credit For example, suppose the accrued wages at the end of a month is $20,000.

The primary journal entry for payroll is the summary-level entry that is compiled from the payroll register, and which is recorded in either the payroll journal or the general ledger. This entry usually includes debits for the direct labor expense, salaries, and the company's portion of payroll taxes.