Vacation Settlement Journal

During the accounting entry structuring process in accounting integration, there is a "Vacation Settlement journal" tab that allows users to select the preferred method for structuring vacation settlement entries.

This feature explains the accounting treatment of annual vacation payments in companies and presents two main accounting approaches.

Detailed Explanation:

1. Salary-Based Method (Default)
   • Vacation payments as part of regular salary expenses (i.e., considered operational costs like monthly salaries).
   • Does not affect the employee's vacation accrual balance on the balance sheet.
2. Accrual-Based Method
   • Vacation payments as vacation expenses (not regular salary).
   • Directly deducts from the employee's accumulated vacation accrual on the balance sheet.

How to Choose the Appropriate Method?

Choose the salary-based method if:

• Vacations are paid immediately without accumulation.
• You prefer simplified accounting (suitable for small businesses).

Choose the accrual-based method if:

• You have significant accumulated vacation liabilities.
• You comply with accounting standards (e.g., IFRS).
• You want to transparently display future liabilities.

Note: The method of recording vacation settlement journal is selected through the accounting integration settings in the Jisr system.

Journal Entry when choose:

Salary-Based Method

Accrual-Based Method

Practical Example of Affected Transactions:

A. Vacation Provision Expense / Vacation Provision

Salary-Based Method (Default):

No separation between "vacation expense" and "basic salary".

• Example: If 5,000 SAR is paid as vacation:

   

  Dr Salary Expense      5,000
     Cr Cash                         5,000

  Result: "Vacation Provision" doesn't appear in the balance sheet.

Accrual-Based Method:

• Records vacations as accrued liabilities added to "Vacation Provision".

  Example: When 5,000 SAR vacation is accrued:

  Dr Vacation Provision Expense      5,000
     Cr Vacation Provision                     5,000

  When paid:

  Dr Vacation Provision      5,000
     Cr Cash                         5,000

  Result: "Vacation Provision" appears as a balance sheet liability.