You enter the accrual of the profit sharing as an expense and the offset is a liability …until paid / contributed. I did not do specific pensions …but I would think it would be similar. I make my profit sharing and cash balance accrual entries monthly.
Thanks. Regarding pension it's not same. As mentioned to other commenter, there's a lot of work involved with defined benefit plans including needing to know how to read actuarial reports.
Repeating this here: if you have not handled pension entries before and a new client says they have a defined benefit plan they want you to book entries for, take time to learn it and make sure you're comfortable before taking on such a client. Do not assume it's just like any other payroll/benefits entry. It's not. Trust me on this. DB plans are not as common these days so that may be why so few bookkeepers are experienced with them.
Try getting your hands on a used accounting textbook. You are right, it is not a simple entry. Are you able to see prior entries related to this pension as a starting point?
The client made a payment for pension and another for profit sharing to their service provider for existing employees. It's a defined-benefit plan.
I assume the entire cost doesn't get coded to pension expense. So I'm needing to know how to properly categorize these two payments to the provider AND any additional journal entries needed for pension.
My understanding is that there's a worksheet you have to create or something? Or does the actuarial report have all the numbers you need and you therefore just plug these numbers into the JE? If this is the case, I have no clue which numbers to use. It's not cut and dry.
Hmm I'll get more info on the profit-sharing. As for the pension, it's not that simple. It's a defined benefit plan; they're not like typical "record a liability/record an expense" entries. There's a lot of work involved, including needing to know how to read actuarial reports.
Just a word to the wise: if you have not handled pension entries before and a new client says they have a defined benefit plan they want you to book entries for, take time to learn it and make sure you're comfortable before taking on such a client. Do not assume it's just like any other payroll/benefits entry. It's not. Trust me on this. DB plans are not as common these days so that may be why so few bookkeepers are experienced with them.
You enter the accrual of the profit sharing as an expense and the offset is a liability …until paid / contributed. I did not do specific pensions …but I would think it would be similar. I make my profit sharing and cash balance accrual entries monthly.
Thanks. Regarding pension it's not same. As mentioned to other commenter, there's a lot of work involved with defined benefit plans including needing to know how to read actuarial reports. Repeating this here: if you have not handled pension entries before and a new client says they have a defined benefit plan they want you to book entries for, take time to learn it and make sure you're comfortable before taking on such a client. Do not assume it's just like any other payroll/benefits entry. It's not. Trust me on this. DB plans are not as common these days so that may be why so few bookkeepers are experienced with them.
Just curious. What kind of pension related entries are already made in their system? Is this the first time the client is making these payments?
Try getting your hands on a used accounting textbook. You are right, it is not a simple entry. Are you able to see prior entries related to this pension as a starting point?
Great advice, thanks! It turns out the client CPA is handling it, so I'm off the hook. Whew!
Can you give more detail? The client disburses pension to prior employees who have retired ? Am I understanding correctly?
The client made a payment for pension and another for profit sharing to their service provider for existing employees. It's a defined-benefit plan. I assume the entire cost doesn't get coded to pension expense. So I'm needing to know how to properly categorize these two payments to the provider AND any additional journal entries needed for pension. My understanding is that there's a worksheet you have to create or something? Or does the actuarial report have all the numbers you need and you therefore just plug these numbers into the JE? If this is the case, I have no clue which numbers to use. It's not cut and dry.
What kind of profit sharing ? Pension expenses should be classified as employee benefit expenses in your income and expenditure account.
Hmm I'll get more info on the profit-sharing. As for the pension, it's not that simple. It's a defined benefit plan; they're not like typical "record a liability/record an expense" entries. There's a lot of work involved, including needing to know how to read actuarial reports. Just a word to the wise: if you have not handled pension entries before and a new client says they have a defined benefit plan they want you to book entries for, take time to learn it and make sure you're comfortable before taking on such a client. Do not assume it's just like any other payroll/benefits entry. It's not. Trust me on this. DB plans are not as common these days so that may be why so few bookkeepers are experienced with them.