AboutArthur Naman Expertise General accounting and bookkeeping questions. How to do monthly bookkeeping, how to prepare financial reports. How to reconcile accounts.
I cannot answer questions pertaining to pension or retirement planning.
This is not a forum to have homework answered. Please do your own homework.
Experience 30 years' experience doing tax and accounting work
Education/Credentials MPA from Univ. of Texas at Austin, MBA Golden Gate Univ, San Francisco CA
Question I am uncertain how to account for a portion of salary that would be deferred for a long time (say years). I work for a non profit and with the economic downturn, rather than layoff people, two of our senior admins would like to defer salary. I assume it becomes a long term liability..is it that simple? Is this enough info? Thank you.
Answer I will freely admit that accounting for and taxation of deferred comp is not one of the areas of bookkeeping I have any experience with. With that said I have the following comments.
Given the scenario, that the non-profit financially cannot afford the compensation to be paid currently, this will be a non-funded plan. The employee has only the employer's promise to pay; that promise in unsecured.
You're correct, there needs to be a liability account, but there also needs to be a deferred expense account. Since the salary expense is not paid out currently it not a current period expense. Accordingly, believe the entries should be something like:
This is not simple, please ask for additional assistance if needed. In addition, I would encourage your talking to the accountant who prepares the annual tax return for the non-profit.
