Since vacation time is paid when used, there is no need to accrue this time in a liability account at the end of each accounting period.

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Vacation time is an employee benefit that is earned as work is performed. As such, it should be accrued as a liability in each period based on the amount earned but not yet taken by employees. Failure to accrue for this time can result in understated expenses and overstatement of net income.

Since Vacation Time Is Paid When Used, There Is No