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#5
08-15-2005, 09:20 AM
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 Re: Accounting for advances Larry wrote: - quote - > My understanding is that advances are entered on the balance
On the presumption that we are discussing accrual accounting:> sheet as an asset. When they are actually earned, they > become an expense and can be deducted? Is this correct, or > can they be expensed when paid rather than when earned. Or > is it something else entirely? Debit Credit ------------ ------------ Advance paid out: Prepaid Acct Cash Monthly accrual: Expense Acct Prepaid Acct Advance received: Cash Unearned Rev Monthly accrual: Unearned Rev Revenue Acct Taxes are unaffected by this process. If you make an advance to an employee, it depends on whether the advance is for expenses or payroll. If it is for expenses, you keep a running total of advances and expense accounts and you settle up at the end of the calendar year. Otherwise you settle up at the next paycheck. Dick << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== > |
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#4
08-15-2005, 09:09 AM
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| Re: Accounting for advances - quote - > My understanding is that advances are entered on the balance
This is really an accounting question and it belongs in an> sheet as an asset. When they are actually earned, they > become an expense and can be deducted? Is this correct, or > can they be expensed when paid rather than when earned. Or > is it something else entirely? accounting group. An advance - by whom? The employer or the employee who received it? Makes a difference as the employee would probably record it as a liability, and then as income when earned. Therefore, without knowing which party to the advance you're talking about, we (or at least I) cannot confirm the correctness of book entry. << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== > |
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#3
08-15-2005, 09:07 AM
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| Re: Accounting for advances "Larry" <Larry[at]larry.com> wrote: - quote - > My understanding is that advances are entered on the balance
An advance to an employee is recorded as an Asset when paid> sheet as an asset. When they are actually earned, they > become an expense and can be deducted? Is this correct, or > can they be expensed when paid rather than when earned. Or > is it something else entirely? to them. In the next paycheck, that advance should be subtracted in determining the net paycheck for that employee. This is the point where that advance gets expensed as part of salaries or wages. Wayne Brasch << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== > |
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#2
08-15-2005, 09:05 AM
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| Re: Accounting for advances "Larry" <Larry[at]larry.com> wrote - quote - > My understanding is that advances are entered on the balance
Sounds about right.> sheet as an asset. When they are actually earned, they > become an expense and can be deducted? - quote - > Is this correct, or can they be expensed when paid rather
Many small businesses do just that. Any amount returned> than when earned. goes against the expense (a credit) and any additional reimbursement goes to expense. If the business needs to accrue the expense/returned amount, it's easy to do. -- Paul A. Thomas, CPA Athens, Georgia << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== > |
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#1
08-15-2005, 09:02 AM
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| Re: Accounting for advances "Larry" <Larry[at]larry.com> wrote: - quote - > My understanding is that advances are entered on the balance
Advance payments BY you, for example insurance you pay for the> sheet as an asset. When they are actually earned, they > become an expense and can be deducted? Is this correct, or > can they be expensed when paid rather than when earned. Or > is it something else entirely? year but "use up" monthly work as you describe. Advance payments TO you do not. These are liabilities and become "revenue" (not expenses) when earned. This is called accrual accounting. Most small taxpayers do not use the accrual method, they use the cash method. Under the cash method expenses are recognized when cash is paid, and revenues are recognized when cash is received. H << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== > |
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08-15-2005, 09:00 AM
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| Re: Accounting for advances Larry wrote: - quote - > My understanding is that advances are entered on the balance
'prepaid expense' sounds right to me.> sheet as an asset. - quote - > When they are actually earned, they
You do mean deducted from the account (not from taxes) don't you:-)> become an expense and can be deducted? << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== > |
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#-1
08-15-2005, 12:04 AM
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| Accounting for advances My understanding is that advances are entered on the balance sheet as an asset. When they are actually earned, they become an expense and can be deducted? Is this correct, or can they be expensed when paid rather than when earned. Or is it something else entirely? Thanks << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== > |
| Tags |
| accounting, advances |
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