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Business and Personal Finance: Accounting for Contributions

December 8, 2022October 13, 2022 by Erica Sporer

Retirement Plans – Accounting for Contributions

Regardless of which type of retirement plan you have, the accounting looks the same. The main difference in your journal entries is between contributions made for you (as the owner, not as an employee of a corporation) or for your employees. Here’s what the entries for company contributions look like under the accrual method of accounting. If you use cash accounting, your credit will be to cash and you won’t use the final paying entry.

Journal Entry: Contributions for Employees

Date Account & Explanation Post Ref Debit Credit
01/30/06 Retirement Plan Contribution Expense 500.00
Retirement Plan Contributions Payable 500.00

To record retirement plan benefits expense for the pay period.

Journal Entry: Contributions for Owners

Date Account & Explanation Post Ref Debit Credit
01/30/06 Janine Smith, Withdrawals 500.00
Retirement Plan Contributions Payable 500.00

To record owner’s retirement plan benefits for the period.

Journal Entry: Making the Contribution

Date Account & Explanation Post Ref Debit Credit
02/15/06 Retirement Plan Contributions Payable 1,000.00
Cash 1,000.00

To record payment made to retirement plan, check #154.

When the company makes contributions on your behalf, it doesn’t usually get an expense deduction. Instead, you take the deduction on your personal tax return (there’s a special line for this). When you’re an owner- employee in a corporation, contributions made for you count the same as for any other employee. These are the general rules; however, your personal financial situation is unique, and your accountant will know the best way to handle your pension contributions and tax deductions. Contributions made by employees will be part of the regular payroll entry, since you withhold those contributions from their paychecks.

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  3. Business and Personal Finance: Checking It Twice
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  5. Business and Personal Finance: Develop a Sales Journal
Categories Business and Personal Finance Tags accounting for contributions received and contributions made, accounting for donations ifrs, accounting for donations received, conditional contribution, contribution revenue recognition, donation account is which type of account, gaap accounting for in-kind contributions, gaap accounting for pledges
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