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. Deferred Compensation

    An amount of earned income that is payable at a later date. Most ...
  5. Expense

    1. The economic costs that a business incurs through its operations ...
  6. Payroll Tax

    Tax an employer withholds and/or pays on behalf of their employees ...
RELATED FAQS
  1. Why is the use of contra accounts so important for maintaining ledgers?

    Contra accounts have been used in financial accounting to verify the balance of another corresponding account since Renaissance ... Read Full Answer >>
  2. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  3. How are prepaid expenses recorded on an income statement?

    Prepaid expenses are not recorded on an income statement. When the prepaid expense becomes due, the expense is recognized ... Read Full Answer >>
  4. How is deferred revenue treated under accrual accounting?

    In accrual accounting, deferred revenue, or unearned revenue, represents a liability on the balance sheet recorded on funds ... Read Full Answer >>
  5. What are some of the advantages and disadvantages of absorption costing?

    Companies must choose between using absorption costing or variable costing in their accounting systems. There are advantages ... Read Full Answer >>
  6. What is the difference between the cost of capital and the discount rate?

    The cost of capital refers to the actual cost of financing business activity through either debt or equity capital. The discount ... Read Full Answer >>
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. Fundamental Analysis

    When & Why Should a Company Use LIFO

    By using LIFO (last in, first out) when prices are rising, companies reduce their taxes and also better match revenues to their latest costs.
  7. Fundamental Analysis

    The Importance Of Analyzing Accounts Receivable

    While investors often focus on revenues, net income, and earnings per share, they should not overlook the importance of analyzing accounts receivable.
  8. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  9. Economics

    What is a Business Model?

    Business model is the term for a company’s plan as to how it will earn revenue.
  10. Economics

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center