USA Bonus Accrual

[knotbuilder]

Bonus Accrual account with balance - X
Payroll Bonus Account with balance - Y

I need to relieve the bonus accrual account to reflect bonuses paid.

Using Quick Books Enterprise I debited the accrual account and credited the payroll account, however in making that journal entry not only does it relieve the bonus account the payroll account is also relived making it look as though the bonus was not paid.

thank you in advance for any help.

 

[Steve-LevelUp]

The entry that you are proposing is presuming that the bonus itself was paid and booked to that account. So, we need to go back a step.

First, you setup the bonus accrual.

Bonus Expense $1,000
Bonus Accrual $1,000


The bonus payment could be booked in two ways

1.
Bonus Accrual $1,000
Cash $1,000

2.
Bonus Expense $1,000
Cash $1,000

The entry you are proposing would apply if you had recorded the expense using option two. So, by booking the entry proposed, it would correctly relieve the bonus accrual, but it would still be clear that the bonus was paid (because you can see the bonus payment in both the expense account and from the cash account.

I hope that helps.

 

[knotbuilder]

in 2016 we accrued the bonuses for the year, in Jan & April 2017 we paid out the bonuses through payroll. So the bonus expense is correct as is cash because it was a payroll transaction. Leaving the accrual liability account still showing the same as the expense account.

What I can't figure out is how to clear bonus accrual account to properly show there is nothing accrued.

 

[Steve-LevelUp]

I would argue that the bonus expense is not correct as the expense was recorded in 2016, there should then be no expense in 2017, so the entry you originally proposed is correct. Dr. the accrual, Cr the expense.

 

[knotbuilder]

There is an expense in 2017 when I pay the bonuses. If I dr the accrual and cr the expense. that end up making the expense 0 making it look as though I did not pay the bonuses.

 

[Steve-LevelUp]

That is incorrect. The bonus expense is in 2016, so you need to remove the expense in 2017. You are confusing cash accounting with accrual accounting. Under accrual accounting, an expense of $0 does not mean that bonuses have not been paid, as those reading the statements would/should know that the expense was recorded in the prior year.

 

[Shcoll]

Bonus Accrual account with balance - X
Payroll Bonus Account with balance - Y

I need to relieve the bonus accrual account to reflect bonuses paid.

Using Quick Books Enterprise I debited the accrual account and credited the payroll account, however in making that journal entry not only does it relieve the bonus account the payroll account is also relived making it look as though the bonus was not paid.

thank you in advance for any help.

The oraginal GJE for the bonuses accrued should be like this:
Dr. Payroll Bonus Expense Account XX
Cr. Accrued Payroll Bonus Account. XX
When the bonuses are actually paid, then Accrued Payroll Bouse Account is debiteda and Cash Account is credited.
If there is a balance left in the Accrued Payroll bouse account before the current books are closed, it should be debited and payroll Bonus Expense account credited.