Journal Entries

Bonuses are accrued as earned. Generally bonuses should be expenses over time as employees perform work over the service period, even when the final bonus amount is conditional on performance. When conditions like performance or other uncertainties exist, a probability weight should be applied.

Accrued expenses are expenses that have been incurred and are neither invoiced nor paid. For expenses that are invoiced and unpaid, these should be recorded in the proper accounting period via accounts payable

Allowance for Doubtful Accounts (AFDA) is an account used to record the estimated amount of customer accounts that may not be collected. It is a contra-asset account, meaning it is a negative asset account that offsets the Accounts Receivable balance. There are two steps to recording AFDA.

Commissions should be recorded when earned (when the sale is closed at the employee has right to receive the commission).

Prepaid expenses are costs that have been paid in advance for goods or services that will be received in the future. Prepaid expenses are recorded as assets on the balance sheet until they are used or consumed. When the prepaid expense is used or consumed, it is then recorded as an expense on the income statement.

Revenue recognition under ASC 606 requires the capitalization of costs to complete a contract. This is most often but is not limited to sales commissions. The capitalized costs are amortized over the expected customer life (the contract length plus reasonably anticipated renewals).

A dividend declaration is a formal action by a company's board of directors that a dividend will be paid to shareholders. The journal entry is the accounting record of the dividend declaration and is used to record the company's liability to pay the dividend.

Credit Card Rewards are recognized when earned.

The early exercise of stock options allows the option holder to purchase shares prior to the vesting period. Typically, stock that is purchased via early exercise is subject to repurchase if the holder does not meet the vesting criteria when an event like employee separation occurs.