Hello! This may be too basic and I apologize for my ignorance in advance, but I am knew to payroll liabilities. Our life Insurance Payable account has gotten out of balance. We debit the account for the invoice totals for the life insurance. Then, if I'm understanding, we should credit the account with the employee withholdings for life insurance. The step I seem to be missing is the employer portion. Should we credit the account with the employer amount? If so, what will the debit be? I can not figure out why this account would be so out of balance. Is this normal? Thanks!
Life Ins Payable Out of Balance Help
Answers
Depending on how your COA is setup, I would post the employee contributions to either LI Expense or LI Exp Contribution. The effect would be to lower the life expense to show the actual expense to the company.
I would book the invoice from the Insur company to A/P and then to Life Insurance Expense.
When you pay the bill, A/P goes to zero. When you pay your employees, they have been paid less, thus giving you (paying into the company) their contribution.
Make sense?
1
That is how I've seen it performed in the past, which is why looking at this on the BS has been confusing. The CFO wants to keep the account as a passthrough on the BS. The only way to do that is for it to balance out. And right now it is not. Theoretically, the debit amounts (the amount invoiced to us by the insurance company) should be washed out by credits that are coming form the pay deductions. The problem that I am seeing is that these credits are far short of the debits. So we are paying more for the life insurance than we are deducting. I am guessing that the employer is paying some of the premiums. If that is the case, would you credit the Liability account with the employer contribution and then debit insurance expense? That's the only way I can think to do it. Thanks so much for your help!
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Accounting