Two parts to the answer. First, yes, salary advances are taxable like normal salary as they are assessable income for the employee.
In regards to the second question, the tax should be accounted for when the advance is deducted from their salary – say in the next pay period – not when it is paid to the employee. This avoids issues such tax bracket movement and applying the wrong rate.
The credit will go to share capital, the equity side of the balance sheet. This may also include a part of the credit going to a share premium reserve account. The debit could go to cash, but may also be in the form of another for the company, such as a fixed asset or debtor. Contributed capital is not always in the form of cash.
No. A credit entry into a natural/normal debit account will decrease that account’s balance. For example, a credit entry to trade debtors will decrease the trade debtor balance. So all natural debit accounts, being expenses, assets and drawings, will decrease with a credit entry.
Cash basis accounting is only used for management accounting purposes. When you use cash accounting, a sale is not recorded and recognized unless paid. In practice, companies sell on credit too so in these cases, cash accounting can not be used to record amounts owed. Hope it helps!
No, credits “decrease” as you say the assets(Balance Sheet) and the expenses (Income Statement). However, a credit will increase the liabilities, the capital and the income. Have a look at this post:
It’s actually part of the equity so neither an asset nor a liability. I’ll try to explain it a bit more in detail. Every company has specific authorized capital. Let’s say for example, that company A has authorized paid capital of 100 shares (share class 1) with nominal value $1 each.
Normally, the shareholders would buy these shares and contribute $100 (100 * $1). That does not mean that they can not contribute more than $1 for each share.
So the amount that is paid in excess of the nominal value is the additional paid in capital. It is also called as share premium (actually share premium is what is most commonly called).
Using the above example, if the shareholders paid $200 instead of $100, the accounting treatment and the journals would be:
Debit Cash $200
Credit Share Capital $100
Credit Share Premium $100
Share premium can be sometimes included in the share capital account but IFRS (and 99% companies that follow US and UK GAAP) record them separately.
