October 30, 2016 admin

Accrued Bonuses/Indemnities

Liabilities and Net Worth

ACCRUED BONUSES/INDEMNITIES LIABILITY ACCOUNT
2411

ACCOUNT EXPLANATION
Bonuses earned by dealers and employees based on total dealership profit and payable in subsequent periods.
TRANSACTIONS
  Jrnl. Dr. Cr.
  Monthly accrual of gross amount of bonuses SE
    Dealer Bonus 9500
    Employee Bonuses 9550
      Accrued Bonuses 2411
             
  Reversal of accumulated monthly accruals in month of actual payment G
    Accrued Bonuses 2411
      Dealer Bonus 9500
      Employee Bonuses 9550
           
  Bonus payroll at time of payment PR  
    Dealer Bonus   9500
    Employee Bonus   9550
      Employee Deductions     2120
      Employee Income Taxes Withheld     2130
      FICA Taxes Withheld and Payable     2140
      Accrued Bonuses     2411
             
  Bonus checks issued PR    
    Accrued Bonuses   2411  
      Cash in Bank—Payroll     1002
             
  Monthly estimate of indemnities accrued CD    
    Indemnities to dealers employees   9060  
      Accrued Bonuses/Indemnities     2411
COMMENTS
  • Additional compensation based on departmental performance (as contrasted with total dealership profit) should be accounted for as regular earnings and credited directly to Account 2410, Accrued Payroll.
  • Bonus payments should be processed through the Payroll Journal in the same manner as other salary and wage payments.
  • Tax counsel should be obtained relative to the timing of payments of accrued bonuses at year end.
  • For indemnities, dealers have two options:
    1. To register in this account the actual payments made for indemnities at time of payment
    – or –
    2. Create a monthly reserve for this liability – then the actual payments should be recorded charging the accrual.