Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the delivery employees have earned during the accounting period indicated in the heading of the income statement. In effect, the company is accruing this expense when the employees are working—by debiting this account and crediting a liability account, such as Holiday, Vacation, Sick Days Payable. When employees take time off with pay for holidays, vacation or sick days, the liability account is debited.
Since this account involves the delivery function of the business, this expense should be reported in the same section of the company’s income statement as the delivery salaries and wages are reported.
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