Hot Dawgs! Inc. has 3 managers that work in shifts throughout the day and night.
ID: 2444007 • Letter: H
Question
Hot Dawgs! Inc. has 3 managers that work in shifts throughout the day and night. The company also employs 4 cooks and 2 waitresses per shift. There are 3 shifts: morning, afternoon, and evening. The managers are paid an annual salary with a 2% bonus every December. The managers also have 20 hours of paid vacation time that they are allotted every year. The 4 cooks are paid hourly and can only work 1 shift per day. The waitstaff is also paid at an hourly rate as well, and the servers can keep all of their tips. Hot Dawgs! Inc utilizes the matching principle of accounting to determine its payroll and has determined that the management bonuses should be reported on the balance sheet as an asset for the company. The owners will also include the tips in the income statement as retained earnings when calculated the revenue for the period. Identify the problem with Hot Dawgs! Inc. payroll accounting, and in 1 paragraph recommend a solution.Explanation / Answer
Matching Principle: The matching principle requires a company to match expenses to the accounting period in which the related revenues are reported. If a direct connection between ervenues and an expense does not exist, then the expense should appear on the income statement for the accounting period in which it was incurred. Keep in mind that expenses are often incurred in a different accounting period than when they are paid. As per Matching principle this bonus is current year expense it has to show as expense in income statement if bonus paid, if its not paid in current year then it has to show in income statement and under current liabilities section in balance sheet. So it is not an asset and don't show in assets side. Server tips are no need to show in our accounts, we have to record in our accounts only which items are related with our business. These tips are related to server and customer only. So these are can record this tips in their accounts if they are maintaining. Because conpany not receiving and not giving any amount or service. Thank you....Related Questions
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