To account for vacation pay, an employer should estimate the amount to be paid and record it as an expense of the weeks during which the employees are working and earning the vacation time.

Question

Quizplus · Accepted Answer

Vacation pay is a liability that a company owes to its employees for their earned vacation time. To account for it, the employer should estimate the amount to be paid and record it as an expense of the weeks during which the employees are working and earning the vacation time. This helps to ensure that the liability is recognized and reflected in the financial statements of the company.

To Account for Vacation Pay, an Employer Should Estimate the Amount