The adjusting entry to record the amount of vacation earned, but not yet taken, includes a credit to accrued vacation liability and the debit to compensation expense.
Step-by-step explanation:
Accrued vacation in the field of accounting is the time of the vacation that the employee has earned working in a company. This is a part of the employee benefit policy of the company.
If the employee has not used it, it is a liability for the employer. The adjusting entry for this is crediting the accrued vacation liability and it is debited to the compensation expense.