USA Should these payments be considered an expense?


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Hello,

I'm the bookkeeper for a small worker cooperative formed as a partnership in California. The cooperative itself is fairly old, started in 1994, but has changed hands many times. When I took over bookkeeping, we had a standing balance in our checking account of close to $12k. It is not clear to me where this surplus came from, as the cooperative is a pass-through entity and all profits are either paid out to members each year or retained in individual equity accounts. These accounts are then paid out when members leave.

The current members are considering increasing our hourly pay. Does this increase in pay have to be considered an expense counted against our yearly profits? Or can we draw on this standing balance of $12k that predated any of our current memberships in a way that offsets the expense?

I'm sorry if this is a strange one, I'm fairly new to bookkeeping and accountancy so thanks for your patience.
 
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Fidget

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Two things here:

1. What happens to the pay increase after the $12k is used up by funding it?

2. What you can/can't do with the $12k is probably more of a legal issue in your jurisdiction. Is there a cooperative society or something similar in your region that you could find out from? In the general scheme of things, if you have a surplus that you don't believe you should have, then you need to exhaust whatever avenues are open to you in trying to find out who it belongs to. Some jurisdictions might require that it becomes property of the state if you're still left with it after trying to resolve the issue. Always best to be sure that legally you can keep it before spending it.
 

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