DEFINITION of 'Wage Expense'

In financial accounting, wage expense represents payments made to non-manufacturing employees, regardless of whether they are hourly or salaried. Depending on the presentation, this line item may also include payroll tax expenses and other benefits paid to employees. Wage expense is recorded as a line item in the expense portion of the income statement.

BREAKING DOWN 'Wage Expense'

Under the accrual method of accounting, wage expenses are recorded based on when the work was performed. By contrast, under the cash method of accounting, wage expenses are recorded at the time cash is paid to employees.
Salaries and wages paid to manufacturing employees are not recorded as wage expense. Instead, they are allocated as part of the cost of the goods manufactured. Initially, the wages and salaries are included in inventory line on the balance sheet. Once inventory is sold, the allocated costs become part of the cost of goods sold (COGS) line item on the income statement.

RELATED TERMS
  1. Wage Push Inflation

    A general increase in the cost of goods that is preceded by and ...
  2. Taxable Wage Base

    Also known as the Social Security Wage Base, this base is the ...
  3. Living Wage

    A theoretical wage level that allows the earner to afford adequate ...
  4. Cash Wages

    Cash wages include any kind of compensation that comes in the ...
  5. Justified Wage

    A wage level for a job that is set by market dynamics and justified ...
  6. Expense

    1. The economic costs that a business incurs through its operations ...
Related Articles
  1. Trading

    Why Wages Stick When The Economy Shifts

    Even economists can't agree on the impact (or even existence) of wage stickiness. So, how does it affect you?
  2. Insights

    Minimum Wages Can Raise Unemployment

    Learn why many economists feel that minimum wages, while intended to benefit low-wage workers, actually hurt them by increasing unemployment.
  3. Insights

    Why $15 Minimum Wage Might Not Be Good News for Anyone (MCD, DPZ)

    Discover why the minimum wage isn't the panacea it is made out to be, and how artificial wage increases strain businesses and consumers.
  4. Insights

    Will You See Higher Wages In 2015?

    It's been a few years into the economic recovery from the Great Recession, and the employment picture has been rocky.
  5. Insights

    These Retailers Are Least Impacted by Wage Increases (WMT, TGT)

    Learn how certain retailers, such as those that have already built wage increases into their business models, face less pressure from rising wages.
  6. Insights

    5 Developed Countries without Minimum Wages

    Find out about five developed nations that have no federally regulated minimum wage and how these countries use unions to ensure workers are paid their due.
  7. Insights

    Wal-Mart's Wage Increase Has Potential Drawbacks for Workers (WMT)

    Wal-Mart workers were overjoyed to hear that they would receive $10 an hour. However, there are significant non-financial drawbacks to this raise.
  8. Investing

    Why Walmart Raised Its Minimum Wage

    Read about the potential pros and cons of Walmart's promise to increase its minimum starting salary to $10 an hour.
  9. Personal Finance

    The Minimum Wage: Does It Matter?

    The numbers show that a fight for a living wage is more important than a fight for a raise in minimum wage.
  10. Personal Finance

    Can A Family Survive On The U.S. Minimum Wage? (WMT, COST)

    As the political debate roars on, the numbers are clear: Even two full-timers at U.S. minimum wage can't keep a family of four above the poverty line.
RELATED FAQS
  1. What are the differences between operating expenses and cost of goods sold (COGS)?

    Discover the differences between operating expenses and cost of goods sold, how each are calculated and why they are considered ... Read Answer >>
  2. What is the difference between capital and operating expenses?

    Learn about the types of expenses that a company incurs. Understand the difference between capital and operating expenses, ... Read Answer >>
  3. How much of my income goes to Social Security taxes?

    Discover how much of your income goes to social security tax: what the rate is, what the limits are and what types of income ... Read Answer >>
  4. Does raising the minimum wage increase inflation?

    Explore whether raising the minimum wage increases inflation. This is a polarizing topic that is inherently linked to unemployment. Read Answer >>
  5. Which states have the lowest minimum wage?

    Learn which two states share the lowest state minimum wage and are also the only two that sit below the required federal ... Read Answer >>
  6. How does fixed costs and variable costs affect gross profit?

    Learn about the differences between fixed and variable costs and how they affect the calculation of gross profit by impacting ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center