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Help With Journal Entries

Deeire Denia's Profile

My company pays 100% of our employees' legal shield and supplemental life insurance up front and we are refunded by the employees during the month. What would the appropriate journal entries for these transactions look like under GAAP?

I thought A debit to the expense account and credit to cash when we prepay on behalf of the employees and a debit to cash and credit to expenses when they pay us will work but my manager disagrees.

I am new at this.

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Yes it will work but NOT recommended. I would NOT debit the expense as you already know (at time of payment) that this will be paid back by the employees at the end of the month?. I would use some sort of Insurance Receivable account and just reverse the debit once paid. This will also serve as a control feature to determine if everyone refunded (zeroed out ) instead of getting folded into the expense account.

Andrew K
Title: Director of Tax and Accounting
Company: Silver Leaf
(Director of Tax and Accounting, Silver Leaf) |

I would agree with the other poster who responded, this would be better entered as a prepaid Insurance Receivable, and reverse it after refunded back by the employees.

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