024 Absentee Compensation

Expenses

Personnel

Synopsis

The amount of compensation paid or payable to employees (excluding owners) while away from the dealership on authorized leave is recorded in Account 024, Absentee Compensation.  This includes Holiday pay, vacation pay, training school pay, jury duty pay and sick leave.

Example 1

Record a mechanical shop technician’s total compensation of $1,600 including $800 of holiday and vacation pay.  The payroll taxes are $544.

Journal: Payroll

Distribution of Expenses

Comments

Vacation and sick pay should be accrued during the year by setting up a monthly provision for compensation earned by each employee.  The monthly provision should be debited to this account and the offsetting credit should be applied to Account 321, Salaries, Wages & Commissions Payable (Accrued Liabilities).  The reason for accruing vacation and sick pay is to pro-rate this expense throughout the entire year.  Otherwise, during popular vacation months in the summer, the dealership’s operating profit is unduly impacted by payment of compensation while employees are away from work.

The Absentee Compensation should be distributed to each respective department based on job assignment.  When an employee serves two or more departments, the Absentee Compensation should be pro-rated and charged to the respective departments.

Note:

For related travel expenses when attending training sessions, refer to Account 075, Training Expense.

Transactions, which are related, should be recorded in separate sub-accounts.  Sub-accounts serve to keep records organized for future analysis and auditing.  The sub-accounts in these examples are designated by a letter following the account number (suffix).  Please refer to your DSP's instructions for establishing sub-accounts.