Accounting, Payroll & Pension Issues/Accounting for signing on bonuses

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Expert: - 9/17/2008


Question
Our company pay sign on bonuses with conditions that if you leave before say lapse of xyears, you need to reimburse the company the pro-rated bonus.My question is at the time the employee is paid the bonus do i put it on a prepaid account and armotise over the agreed period or do i expense the whole amount at payment date?any accounting standars governing this will be appreciated.

Answer
At the time the bonus is paid it is considered wages. It is expensed at that time, the whole bonus.

It is cash money paid out to an employee, it is not spread out over several months such as equipment. Since it is a cash payment it is not going to depreciate over years.  Cash is always booked as cash out.

Shirley

Accounting, Payroll & Pension Issues

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Shirley McAllister, CPP, PHR

Expertise

I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.

Experience

25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.

Organizations
SHRM, APA, I.O.M.A.

Publications
I.O.M.A. and BNA

Education/Credentials
P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

Awards and Honors
APA Hotline Citation of Merit for last 8 years.

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