Bonus payable is the amount of bonus an employer owes but has not yet paid, recorded as a liability until it is paid out.
What is bonus payable?
Bonus payable refers to a bonus that has been earned or approved but hasn’t been paid yet. Until the payment is made, the business records the amount as money it still owes. This helps keep financial records accurate, especially at month-end or year-end, when payroll costs need to reflect bonuses that relate to that period. Once the bonus is paid through payroll, the liability is cleared.
Clear tracking of bonus payable supports accurate reporting and helps ensure people are paid what they’re due.
Things to know
- Bonus payable is an accounting term that describes money owed, not money already paid
- It’s often recorded at month-end or year-end to match costs to the correct period
- The amount becomes “payable” once it’s earned, approved or contractually due, depending on company policy
- When the bonus is paid, the payable balance is reduced
- Bonus payments are usually processed through payroll and may be subject to tax and deductions
FAQs
When does a bonus become ‘bonus payable’?
Usually when the bonus has been earned and is approved or contractually due, even if it hasn’t been paid yet.
Is bonus payable the same as a bonus?
Not exactly. A bonus is the payment itself. Bonus payable is the amount owed before it’s paid.
Why do businesses record bonus payable?
To keep financial reporting accurate and make sure payroll costs are recorded in the right period.
How is bonus payable paid out?
It’s typically paid through payroll, along with the normal deductions that apply.
Does bonus payable affect an employee’s take-home pay?
Not until it’s paid. Once paid, tax and other deductions may apply, which affects net pay.
