Expert: Shirley McAllister, CPP, PHR - 1/13/2009

Question
Hi.  One of my clients is a non-profit agency.  The director receives a salary.  The payroll is completed bi-weekly.  Unfortunately, since funds are tight (especially this year), the director would also receive quarterly paychecks (when funds were available) to bring his earnings up to his true salary amount.  However, In Year 2008, the quarterly checks were unable to be distributed.  He has explained that I can defer this expense, but I want to verify with an expert.  I need the P/R in Year 2008 to reflect his total compensation, but I don't want to issue the paychecks until Year 2009 and pay the P/R taxes in Year 2009.  Can I just make a journal entry for the books?  Thank you for your time.  Pat

Answer
You can set up an account for Deferred Earnings as long as the employee is at a Director level.  The checks must be dated and paid in 2009.

Then when you pay and post the amounts in the system you would credit the deferred earnings account.

Shirley