ACCOUNTING FOR TIME PAID NOT WORKED
Introduction
1. Many companies make payments to employees that compen-sate them for other than time worked. The payments often are for periods of absence from employement, such as for vaccations, sick days, holidays, and jury duty. Other payments are made on separation of employment (severance pay, termination indemnities) or during post separation periods, such as the continuation of life and medical in-surance benefits. Some post separation payments are made to, or on behalf of, individuals other than the employee, such as a spouse or other dependent.
2. The degree of formality of the arrangements providing for payments other than for time worked varies consid-erably. The payments may be required by law or by contract, as in the case of a collective bargaining agree-ment, they may be established by company policy, or they may be made to certain employees solely at the discretion of management or the owners of the business.
3. The accounting treatment for payments other than for
time worked varies in practice. Two methods are currently
