Wage Expense

AAA

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.

INVESTOPEDIA EXPLAINS '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. Cost Cutting

    Measures implemented by a company to reduce its expenses and ...
  2. Cash Wages

    Cash wages include any kind of compensation that comes in the ...
  3. Adjustment Income

    Income paid to the dependent(s) of a primary wage earner in the ...
  4. Bonus

    1. Additional compensation given to an employee above his/her ...
  5. Deferred Compensation

    An amount of earned income that is payable at a later date. Most ...
  6. Payroll Tax

    Tax an employer withholds and/or pays on behalf of their employees ...
Related Articles
  1. Investing

    Earnings: Quality Means Everything

    It's quantity that generates all the hype, but there are more meaningful factors that gauge true performance.
  2. Fundamental Analysis

    Understanding Pro-Forma Earnings

    These figures can either shed light on a company's performance or skew it. Find out why.
  3. Fundamental Analysis

    Analyzing Operating Margins

    Find out how to put this important component of equity analysis to work for you.
  4. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  5. Forex Education

    Earnings Sustainability: The Key To Your Investing Future

    Learn how to analyze earnings sustainability - an important part of making sound investments.
  6. Investing Basics

    What are Financial Statements?

    Financial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...
  7. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  8. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  9. Fundamental Analysis

    The Best 5 Online Accounting Systems For Small Business

    Running a small business can be difficult, but thanks to these online accounting services, taking care of payroll doesn't have to be.
  10. Investing

    Understanding Cost Accounting

    Cost accounting is the method of financially allocating expenses to goods that are manufactured for resale. Cost accounting is also referred to as managerial accounting, because managers use ...

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
Trading Center