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Differentiate between “accounting for the employer” and “accounting for the pension fund.”

Short Answer

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Accounting is a term where the finance or the accounting department of an organization records the financial transactions using financial statements to identify its financial position and cash management.

Step by step solution

01

Introduction

The accounting for employer and pension funds differs in various cases. They both are related to the pension contribution made by the firm.

02

Difference between accounting for the employer and accounting for pension fund

Accounting for employer

Accounting for pension fund

It is a term used when an employer is responsible for the contribution and sponsorship of an employee's pension plan.

It is a term used when the organization receives the contribution from both employer and the employee towards a specific pension plan that will benefit the employee.

It involves allocating, measuring, and disclosing the plan’s financial information in its financial statements.

It involves the identification of the contribution plans that the employer has sponsored.

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Most popular questions from this chapter

In computing the interest component of pension expense, what interest rates may be used?

Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2017 in which no benefits were paid. 1. The actuarial present value of future benefits earned by employees for services rendered in 2017 amounted to \(56,000. 2. The company’s funding policy requires a contribution to the pension trustee amounting to \)145,000 for 2017. 3. As of January 1, 2017, the company had a projected benefit obligation of \(900,000, an accumulated benefit obligation of \)800,000, and a debit balance of \(400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to \)600,000 at the beginning of the year. The actual and expected return on plan assets was \(54,000. The settlement rate was 9%. No gains or losses occurred in 2017 and no benefits were paid. 4. Amortization of prior service cost was \)50,000 in 2017. Amortization of net gain or loss was not required in 2017. Instructions (a) Determine the amounts of the components of pension expense that should be recognized by the company in 2017. (b) Prepare the journal entry or entries to record pension expense and the employer’s contribution to the pension trustee in 2017. (c) Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2017.

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