Accrued vacation liability is another name for vacation pay payable, the obligation an employer records for vacation days its employees have already earned through their work but have not yet used. The main entry covers when the liability must be recognised, how it is measured and a worked example.
Where the name appears
Payroll systems, HR reports and audit working papers often use "accrued vacation liability" or "accrued PTO liability" because the phrase describes both how the balance arises and what it is. Each pay period, as staff earn more hours, the employer accrues an expense and adds to the liability; when an employee takes time off or is paid out on leaving, the liability is reduced. The expense side of the same entries is described in the entry on accrued vacation pay.
The balance is usually reported among current liabilities, since most earned leave is expected to be used or paid within a year. It is one example of compensated absences, a category that can also include sick pay and holidays, and it is recorded in line with the matching principle so that the cost of leave falls in the period when the work was done. For employers with long-serving staff, generous carry-over rules or rising pay rates, the balance can grow large, which is why auditors and lenders often check how it has been calculated.