What is Management Fees In Accounting

It is paid to the Management of the company who manages the business on the behalf of owners or shareholders of the business. It is an Expense for the company to pay to the management of the company during the accounting period. If it is not paid during the accounting period, then Management Fees Accrual Account is created which is paid later on to the management.

Management Fees is a Temporary Account which is closed to Income Statement and recorded as an Operating Expense. It is to be noted that when management fees incurs, we debit it and when it closed to Income Statement, we credit it.

Management Fees Journal Entry

When it is incurred, then the company pass the following Accounting Journal Entry:

                                     Management Fess a/c  XXX

                                                                        Cash a/c  XXX

                                                    (Paid Management Fees To Managers)

When it is accrued or outstanding for the accounting period, then it would be paid after the end of the accounting period. Following Entry is recorded for Adjusting Management Fees as shown below:

          Management Fees Expense a/c  XXX

                                                             Management Fees Accrued / Payable a/c  XXX

                                                 (Management Fees Accrued For the Month)