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The accounting for salaries paid to employees involves journal entries. When employees work and are owed money, the employer debits salaries expense and credits salaries payable. A $100,000 salaries expense reduces net income and increases current liabilities on the balance sheet. Payroll taxes, union dues, and other deductions need to be accounted for, including federal income tax withholding in most countries. Later, the employer pays employees by debiting salaries payable and crediting cash.
