Q: if $500 is credited to cash account (decrease balance) and bonus payable is debited, $500 (decrease balance), can the bonus payable show up in the income statement as an expense? if so, what would the offset be?
A: Bonuses Payable is an accrued liability, which means that it has been expensed through the income statement but not yet paid. At the time the $500 Bonus Payable arose, a $500 debit entry was made to Bonus Expense in the income statement and the offset was a $500 credit entry to Bonuses Payable, a liability account, an obligation.
In the example on Slide 62, the company paid $15,000 of bonuses in cash to various individuals in the company it has promised to pay. The accounting entries were a $15,000 credit entry to Cash and a $15,000 debit entry to Bonuses Payable. In prior entries to record the expense and record the obligation to pay it, the company posted a $15,000 debit entry to a Bonus Expense account and an offsetting $15,000 credit entry to Bonuses Payable.
Course overview: Double Entry Accounting, the Accounting Equation, and Debits and Credits