What is compensation in accounting
Focusing on financial terminology, an offset is an extra amount of money that you get or pay as a “penalty” for a late payment. For example, if you are late in making a payment, you must compensate that delay with a surcharge that you must pay.
The reverse situation can also occur. That is, a payment that you must make may be offset by a condition or situation that you meet. If so, the final amount you must pay may be less than expected, as a reward for meeting a condition.
If we are late in paying a debt, we will have to pay the creditor extra money, called late payment interest. This is due to the inconvenience we may have caused, i.e., we have to compensate the creditor for our delay in paying the debt.
This is the amount that the workers of a company receive for doing their work, i.e. their salary. In addition to this, they can also be incentives or other benefits that the company grants them.
It is one of the best known causes of extinction of an obligation between entities. It occurs when two entities are reciprocal creditors and debtors. That is, when bank A owes bank B, and vice versa, and both debts are extinguished. For this to occur, the debts must meet two conditions: they must be liquid and due.
Examples of compensation
In psychology, compensation is a strategy by which one covers up, consciously or unconsciously, weaknesses, frustrations, desires, or feelings of inadequacy or incompetence in one area of life through gratification or (the desire to achieve) excellence in another area. Compensation can cover up real or imagined deficiencies and personal or physical inferiority. Positive compensations can help a person overcome his or her difficulties. On the other hand, negative compensations do not, resulting in a reinforcement of the feeling of inferiority.
A well-known example of failed overcompensation is seen in people who are going through a midlife crisis. As they approach midlife, many people lack the energy to maintain their psychological defenses as well as their compensatory acts.
In his 1907 book Study of Organ Inferiority and Its Physical Compensation, he describes this relationship: If a person feels inferior (weak), he will (usually) try to compensate in some way.
Compensation civil code
The human resources department in an organization is critical to the overall success of the organization; especially when it comes to establishing strategies to make employees feel comfortable with the work environment and motivated to achieve the company’s goals.
Direct rewards are divided into different types, among which extra compensation for services rendered and bonuses stand out. While indirect compensation has to do with long-term benefits and incentives.
-Monetary: This is any type of remuneration in addition to a worker’s basic salary. Christmas bonuses, vacations, social benefits and other extra payments are part of the monetary type of compensation.
– Bonuses: Bonuses are the most commonly used compensation as an incentive to increase employee performance for a certain objective, either time or volume. They are also used to retain high potential employees with certain skills or expertise needed by the company.
Examples of voluntary set-off
Obligations are not only extinguished by payment, but there are several ways to extinguish them, one of those ways is what is known as set-off, and due to the importance of this method is that we will explain how it works in this article.
The debtor can waive the set-off, this waiver can be express or tacit. If you decide to waive the set-off, you will have to pay the obligation that is charged to you, but this does not prevent you from also being able to collect your credit, since it has not been extinguished by not opposing the set-off.