# Accounting for employee benefits > Northwind's October plan as five journal entries: the carrier's bill, the employees' pre-tax share, the employer's expense, a prepaid premium and the payable that ties them. Source: https://lopifi.com/learn/accounting-for-employee-benefits Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com) --- **How do you record employee health insurance in the books?** Northwind's October plan as five journal entries: the carrier's bill, the employees' pre-tax share, the employer's expense, a prepaid premium and the payable that ties them. Benefits add three accounts to Northwind's chart: 1450 Prepaid benefits, 2150 [Benefits payable](https://lopifi.com/md/glossary/benefits-payable) and 6150 [Employee benefits expense](https://lopifi.com/md/glossary/employee-benefits-expense). The whole of October's plan is five entries, and only one of them is Northwind's own cost. On the 25th, payroll takes the employees' $325 out of their pay. It is part of their [gross pay](https://lopifi.com/md/glossary/gross-pay) — already in payroll expense — so it is not a second cost; it is a slice of the wage credited to the payable instead of to cash. *[Figure: double entry]* BEN-2: one wage, four places it went. At month end Northwind records its own 75%: $975 of employee benefits expense. That is the month's cost of the plan to the company, and it belongs to October because October's cover was used. Benefits payable now nets to $0: the $1,300 paid on October 1 is matched by the employees' $325 and Northwind's $975. A balance left over at month end is a missed deduction, a missed accrual or a bill paid twice — reconcile it to the carrier's invoice every month. ## Paying ahead: a prepaid premium On October 28 the November bill is paid early. On October 31 none of November's cover has been used, so the $1,300 is an asset — a [prepaid expense](https://lopifi.com/md/glossary/prepaid-expense) — not October's cost. *[Figure: prepaid expense]* One month of cover paid ahead, running through November. **Wrong:** October: 6150 Employee benefits 2,600 — both bills paid in October, both shares **Right:** October: 6150 Employee benefits 975 October 31: 1450 Prepaid benefits 1,300 The cost of a benefit follows the month of cover, not the day the bill is paid. And only the employer's share is benefits expense. *[Figure: month end close]* The month-end close, with the benefits payable reconciliation as one of its steps. Illustrative. **Exercise — Book October's premiums.** Write three of Northwind's October entries from the event alone. BEN-1: The carrier's October bill is paid: $1,300 for 2 enrollees. BEN-3: November's bill is paid early: $1,300 for cover that starts on November 1. BEN-4: Northwind's own 75% share of October's premiums: $975. One pays a bill for cover that has not started. One is the only line in October that is Northwind's own benefits expense. Type it in the workbook at https://lopifi.com/playground. > **Pay the bill to the payable, take the employees' share from their gross, and expense only the employer's share, in the month of cover.** ## Where this lesson's rules come from - [ASC 340-10](https://asc.fasb.org/340/tableOfContent) — Other Assets and Deferred Costs — prepaid expenses (codification) - [ASC 405](https://asc.fasb.org/405/tableOfContent) — Liabilities (codification) - [IRS Publication 15 (2026), Circular E — Introduction](https://www.irs.gov/publications/p15) — Withheld payroll taxes are the government's money, held in trust (tax) ## Read further - https://lopifi.com/md/journal-entries/payroll - https://lopifi.com/md/journal-entries/prepaid-insurance - https://lopifi.com/md/journal-entries/accrued-expenses - https://lopifi.com/md/differences/prepaid-expense-vs-accrued-expense - https://lopifi.com/md/differences/accrued-expenses-vs-accounts-payable - https://lopifi.com/md/startups/payroll-journal-entries - https://lopifi.com/md/startups/chart-of-accounts-for-startups - https://lopifi.com/md/accounting/prepaids - https://lopifi.com/md/accounting/accrued-expenses - https://lopifi.com/md/tools/journal - https://lopifi.com/md/tools/amortize - **Track:** [Health & benefits](https://lopifi.com/md/learn/benefits) - **Lesson:** Lesson 10 of 10 — 12 min - **Terms taught:** [Employee benefits expense](https://lopifi.com/md/glossary/employee-benefits-expense), [Benefits payable](https://lopifi.com/md/glossary/benefits-payable), [Prepaid expense](https://lopifi.com/md/glossary/prepaid-expense), [Payroll liabilities](https://lopifi.com/md/glossary/payroll-liabilities) - **Previous:** [State auto-IRA mandates, Benefits · Lesson 9](https://lopifi.com/md/learn/startup-retirement-plans-401k-simple-ira/state-auto-ira-mandates) - **Next:** [What the R&D tax credit is, and who can use it, R&D credit · Lesson 1](https://lopifi.com/md/learn/what-is-the-rd-tax-credit) - **The course:** https://lopifi.com/md/learn