> On 10 May 2020, at 19:05, Kent R. Spillner <[email protected]> wrote:
>
> Hi, ledger friends-
>
> Happy Mother's Day!
>
> I realize this is an Accounting 101 question and not ledger-specific, but for
> the people on this list using ledger to manage their own business: how do you
> categorize dividends vs wages? Are they technically considered expenses or
> liabilities?
Wages are categorized as expenses in the P&L report, dividends appear as
outflows only on the cash flow reports. I put it under investing cash flows but
an outflow as operational cash flow can be also accepted.
>
> I track W2 wages as Expenses:Acme:Pay:Alice and dividends as
> Expenses:Acme:Pay:Dividend:Bob. It seems to be working fine for my wife's
> business since I started using ledger back in February, but I wonder if
> there's a better way?
The problem of categorizing dividends paid to partners is that it’s usually not
an operational expense. If your business isn’t profitable you will probably not
be getting dividends.
If you work in the company you own you should only expense that way the fixed
pay that the company pays you monthly. I’m not sure ledger if able to do it,
but at a fixed interval the accrued profit for the period should go to an
equity account like Equity:Retained Earnings
When the dividend is effectively paid you have a debit on the equity:Retained
Earnings and a credit on the assets:cash. So the value of the company is
transferred to the partners assets.
I’m not sure ledger can transfer the effective period profit to another
account, it’s called zeroing the account. John can probably answer it better
though
>
> Should payroll for each employee be modeled as something like a debit to
> Liability:Acme:Salary:Alice and a credit to Expense:Acme:Accounts
> Payable:Alice:Salary? Should dividends be a debit to Equity:Acme:Owners:Bob?
You should debt your asset:cash and credit the expense when the salary is paid.
You can create a provision for future employee expense if that is the case
there.
For instance, if you pay a Christmas bonus for employees that is accrued
monthly you should debit Expenses:Acme:Alice:Bonus and credit
Liabilities:Wages:Alice:Bonus
When the bonus is paid you just reverse it with a credit on assets:cash and a
debit on Libilities:Wages:Alice:Bonus
>
> Also, how do you track payroll taxes? In the US employers are required to
> automatically withhold a percentage of an employee's wages and pay taxes with
> that money on the employee's behalf, and additionally there are other taxes
> that are the emplyer's responsibility. I'm just tracking them as separate
> expense accounts, but I feel like professional accountants probably have a
> better method. (Apologies to int'l readers if this is too US-specific)
I prefer to create an account for each employee and categorize sub expenses for
the respective employee. If it’s an overhead indirect cost it’s categorized in
another account.
>
> For what it's worth, I've mostly been re-reading this section of the manual
> for inspiration:
> https://www.ledger-cli.org/3.0/doc/ledger3.html#Tracking-reimbursable-expenses.
> If there are other good sources of information for these types of things
> I'd appreciate pointers (I've bookmarked the Software Freedom Conservancy
> tutorials from plaintextaccounting.org but haven't gotten around to reading
> them yet; are they applicable to for-profit business entities as well?).
What I really couldn’t find so far is a proper emacs tutorial. I mostly use
spacemacs / doom emacs to edit ledger files but I can’t say for sure I
understand how they work.
Maybe the ledger-mode files can help you.
>
> I'm curious to hear how other people handle these issues in their ledgers.
>
> Thanks in advance!
>
> Best,
> Kent
>
>
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