Journal Entry for Food Expenses paid by Company
Employee satisfaction is an important component of a successful business. Making sure employees are taken care of can directly contribute to their productivity and, in turn, the company’s bottom line. One way to keep your employees happy and productive is by providing free or subsidized meals at work.
Having meals provided by the company can come in several forms. In some cases, companies will completely cover meals for certain positions or departments. This helps ensure that all employees have access to nutritious food during their workday without straining their budgets individually.
Alternatively, employers may choose to subsidize meal costs for all employees. Employers may also opt for a cafeteria system that allows workers to purchase meals through deductions from their paychecks. This type of subscription plan gives each employee control over how much they spend on food each month and gives them access to healthy options.
No matter what form it takes, offering meals at work can provide a number of benefits to both the employer and the employee. From an employer’s perspective, providing free or discounted meals can reduce overall labor costs since it eliminates the need for additional overtime due to employees who need to leave work early in order to get food elsewhere. It also reduces paperwork associated with providing reimbursements for off-site meal expenses as well as provides an opportunity for team building since people are likely eating together in shared areas.
Journal Entry for Food
The food for employees will be recorded as an expense on the company income statement.
The journal entry is debiting food expenses and crediting cash paid.
| Account | Debit | Credit |
|---|---|---|
| Food Expense | XXX | |
| Cash | XXX |
The food expense will be presented on the income statement. It can be under employee benefits if it is provided to all employees without any exceptions.
Example
ABC is a manufacturer located in rural areas. To encourage the employees to work hard, company is providing free food to all employees. The company has spent $ 12,000 per month on food. Please prepare journal entry for food expenses paid by company.
The company has paid the food cost for all employees, so it must be categorized as an expense on the income statement.
The journal entry is debiting $ 12,000 food expenses and crediting cash $ 12,000.
| Account | Debit | Credit |
|---|---|---|
| Food Expense | 12,000 | |
| Cash | 12,000 |
Disadvantage of Providing Food to Employees
- Increased Cost: Providing food to employees can be expensive depending on the type and amount of food being offered, and businesses must factor this additional expense into their budget. This can cause a strain on finances and prevent companies from reinvesting profits back into the business.
- Decrease Productivity: Overindulgence in food during meal breaks can lead to decreased energy levels and productivity among workers. This can also create an unhealthy work environment if food becomes a higher priority than completing tasks.
- Hygiene Issues: To avoid health risks, it is crucial to maintain proper hygiene when managing and serving food in communal spaces. This includes monitoring temperature, checking expiration dates, and following sanitation guidelines.