029 Retirement Benefits
Expenses
Personnel
Synopsis
The amounts set aside for employee retirement plans are recorded in Account 029, Retirement Benefits. This includes pensions, 401(k) plans, annuities, and other retirement benefits.
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Debits |
Credits |
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Example 1
Record the payment of the salary, wages & commission in the amount of $199,000 of which $56,170 is payroll taxes and $14,400 is retirement benefits. The company’s contribution to a retirement plan for the employees is $3,600. The payroll taxes and retirement benefits are distributed to each department as shown in the example below.
Journal: Payroll
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Entry: |
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Debit |
Credit |
|
Account 321 |
Salaries, Wages & Commissions Payable |
$180,000 |
|
|
Account 025-01 |
Taxes - Payroll – New Vehicles Department |
$5,090 |
|
|
Account 025-02 |
Taxes - Payroll – Used Vehicles Department |
$3,095 |
|
|
Account 025-04 |
Taxes - Payroll – Finance & Insurance Department |
$1,830 |
|
|
Account 025-05 |
Taxes - Payroll – Mechanical Department |
$3,450 |
|
|
Account 025-06 |
Taxes - Payroll – Body Shop Department |
$385 |
|
|
Account 025-07 |
Taxes - Payroll – Parts & Accessories Department |
$1,550 |
|
|
Account 029-01 |
Retirement Benefits – New Vehicles Department |
$1,200 |
|
|
Account 029-02 |
Retirement Benefits – Used Vehicles Department |
$600 |
|
|
Account 029-04 |
Retirement Benefits – Finance & Insurance Department |
$400 |
|
|
Account 029-05 |
Retirement Benefits – Mechanical Department |
$ 900 |
|
|
Account 029-06 |
Retirement Benefits – Body Shop Department |
$100 |
|
|
Account 029-07 |
Retirement Benefits – Parts & Accessories Department |
$400 |
|
|
Account 202 |
Cash in Bank |
|
$128,430 |
|
Account 323 |
Payroll Taxes Payable |
|
$56,170 |
|
Account 330 |
Retirement Benefits Payable |
|
$14,400 |
Distribution of Expenses
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|
Departmental Distribution |
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029 Retirement Benefits |
New Veh. |
Used Veh. |
Lease & Rental |
Mechanical |
Body Shop |
Parts & Access. |
Gen & Admin. |
|
|
01 |
02 |
03 |
05 |
06 |
07 |
09 |
|
Formal pension or retirement fund |
Employees participating |
Employees participating |
Employees participating |
Employees participating |
Employees participating |
Employees participating |
Employees participating |
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Payments to retirees not covered by a formal plan |
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|
|
|
|
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Total expense |
Comments
Similar to employee benefit insurance plans, wide ranges of retirement plans are available. A careful study of several retirement plans is advisable. It is important to select the best overall plan that meets employee needs and offers the best value. The monthly provision is debited to this account and the offsetting credit is applied to Account 330, Retirement Benefits Payable.
The cost of the Retirement Benefits should be pro-rated to each department based on the employees in the Department.