1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

If I pay the wages for the month of Sept on Oct 1st, what month should I put them in my P&L as?

Discussion in 'Business & Tax Advice' started by macdonjo3, Oct 1, 2016.

  1. macdonjo3

    macdonjo3 Jr. VIP Jr. VIP

    Joined:
    Nov 8, 2009
    Messages:
    5,614
    Likes Received:
    4,362
    Location:
    Toronto
    Home Page:
    If I pay the wages for the month of Sept on Oct 1st, what month should I put them in my P&L as?

    I want to put them as Sept’s P&L so I can match my revenue responsible in Sept, but the transaction was done in October.

    If I put them in my Oct month, then my profit would be the revenue in Sept, against the cost in October.
     
  2. BassTrackerBoats

    BassTrackerBoats Super Moderator Staff Member Moderator Jr. VIP

    Joined:
    Mar 10, 2010
    Messages:
    15,893
    Likes Received:
    29,204
    Occupation:
    I don't actually have a job
    Location:
    Not England
    Home Page:
    September.

    You buy a box of widgets to resell in September on your CC and when the bill comes in on Oct 10th you pay it but the expense is associated with the activity in September.
     
    • Thanks Thanks x 2
  3. davids355

    davids355 Jr. VIP Jr. VIP

    Joined:
    Apr 25, 2011
    Messages:
    9,831
    Likes Received:
    7,436
    Home Page:
    Agree with BTB. I think it's technically correct for one, and secondly remember accounts should actually be a tool for monitoring your business so make them make sense - and exactly as you said you want that bill to correlate to the income from September.
     
  4. macdonjo3

    macdonjo3 Jr. VIP Jr. VIP

    Joined:
    Nov 8, 2009
    Messages:
    5,614
    Likes Received:
    4,362
    Location:
    Toronto
    Home Page:

    That's the answer I wanted! It's much easier to track the profit this way. Good point, bills don't always come immediately. The example makes sense.
     
  5. Aesteroth

    Aesteroth Junior Member

    Joined:
    Feb 25, 2016
    Messages:
    156
    Likes Received:
    148
    As an accountant, I would agree with the above answers. Your expenses should hit your P&L in the month that they are incurred. So if an expense is incurred and expired (you have a legal liability to pay it and there is no prepayment element) in September then you should accrue the expense in that month (i.e. debit to P&L as expense credit to balance sheet as an accrual).

    When you actually physically pay the cash in October it will simply be a balance sheet movement to offset the accrual (debit accrual, credit bank).

    TLDR; what they said above.
     
    • Thanks Thanks x 1
  6. TheNumbersGuy

    TheNumbersGuy Jr. VIP Jr. VIP

    Joined:
    Jul 14, 2016
    Messages:
    148
    Likes Received:
    20
    Gender:
    Male
    Occupation:
    IM Fluent Accountant
    Location:
    Vancouver, Canada

    These expenses should have been accrued in the month of September, the entry would be something like this:

    September 30

    DR Wages Expense XX.XX
    CR Wages Payable XX.XX

    October 1

    DR Wages Payable XX.XX
    CR Cash XX.XX