Year end is April 10. Paid salaries April 12. Applies to previous tax year your (before April 10) or next?

Question

Corporation year end is April 10.

Corporation paid salaries April 12.

Does the amount count as an expense for the previous tax year, ending April 10 or the next, beginning April 11?

Answer 1

I'm assuming that April 12 was the last day in the pay period. If this is the case, the the proper thing to do would be to accrue salaries and the appropriate payroll taxes that were earned in prior to april 10th and count those accruals as an expense for the tax year ending April 10. Here is an example of what I mean.

Let's say that you have weekly salaries of 100 Dollars. Your corporation year end is on April 10th, a Wednesday. But your employees are paid on April 12th, a Friday. What you should do is take 60$ as a salary expense for the year ending April 10th (3 days X 20$ a day.) For simplicity's sake, lets pretend that the journal entry is something like
DR Salaries 60
CR Cash 60

Then, on April 12th, you will have an entry that is;
DR Salaries 100
CR Cash 60

Now you might be thinking that you are double counting the first 3 days, but all you have to do is reverse the first entry on April 11th and you will be right where you need to be. Hope this helps

Answer 2

The expense is the year of the cheque...but then when you do the taxes for the past year you need to credit the accounts required for the past year. This will be completed by the accountant. Also most companies don't end there year in the mid of the month they end at the end of the month.

What you would do is break down the salaries into 10 days then take 8 days of salary and charge them back to the previous year leaving the two days that for the new year would stay in the forgoing year. This is only for year end purposes.

For Tax purposes you do salaries at year end. So you would follow the same procedure for the date of December 31 of the year.

Salaries are the only type of accounts that you do more than once a year for tax purposes.

Answer 3

It's an expense in the year when the checks were dated, not when the work was actually done. So if they are dated April 12 and the tax year ended April 10, then they are an expense for the NEXT year.