i agreed to work for a small company for a salary and 20% of the increase in profit that I added to the business. How do we account for this so that I don't have to earn the bonus twice. My concern is that the bonus at the end of the first year will be added into the costs of the second year . For example.Before I came business was making 100 pa net profit. At end of second year I have increase this to 200 pa net profit. My bonus is 20 (200-100 x 20%). If the business made 200 the third year, would the bonus for the second year have to be paid out of the third years profits, thus reducing my bonus?
UK bonus calculation
- Thread starter griffer
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The business should accrue it at the end of the year it relates to. That way the cost of it will not hit the next accounts.
Even if they don't accrue it, they'd still have to adjust the next year's accounts to reflect only the profit that was made in that year.
Even if they don't accrue it, they'd still have to adjust the next year's accounts to reflect only the profit that was made in that year.