Esop

This query is : Resolved

Guest

Guest (Querist)

10 June 2014 In chapter of employee stock option plan there is journal entry regarding expense in respect of ESOP recognised during the year

employee compensation expense a/c ...DR
employee stock option outstanding A/C

my query is why employee stock option outstanding is credited ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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11 June 2014 the idea to debit the employee compensation a/c in the respective year is to follow the matching principle and allow for expense to be booked in the relevant year. However, the stocks are to allotted in a future year.

So to accumulate balance against which shares are to be issued, the credit part is parked to employee stock option o/s A/c. So this act as the company's liability towards its employees against which shares to be issued in future.

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