Employee benefits refer to non-salary forms of compensation provided to employees in addition to their

regular wages or salary. These benefits are offered to attract and retain employees, enhance job
satisfaction, and promote employee well-being. In the context of accounting, managing and accounting
for employee benefits is crucial for accurate financial reporting. Here are some common types of
employee benefits and how they are accounted for:

1. Health Insurance:

 Employers often provide health insurance coverage for employees. The cost of providing
this benefit is recognized as an expense on the income statement.

2. Retirement Benefits:

 Employer-sponsored retirement plans, such as 401(k) plans, involve both employer and
employee contributions. Employers record their contributions as an expense on the
income statement.

3. Pension Plans:

 For companies with defined benefit pension plans, accounting involves complex
calculations based on actuarial assumptions. The cost of providing future pension
benefits is recognized over time.

4. Paid Time Off (PTO):

 Accrued vacation and sick leave are considered liabilities on the balance sheet until the
time is taken. As employees use their paid time off, the accrued liability is reduced.