Lesson: Compensated Absences Example

In this lesson, Nick Palazzolo, CPA, walks through an accounting scenario dealing with compensated absences, specifically recording liabilities for accrued vacation time. He breaks down the example of an employee, Robert Jones, who has accrued paid time off and illustrates how a company should calculate and carry forward these unutilized vacation days as a liability. Nick demonstrates the recording process using journal entries for both the accrual at the end of year one and the payment after a salary increase in year two. This tangible example offers clear guidance on handling real-life situations regarding employee benefits and the related implications on financial statements.