Stock option accounting entries refer to the recording of the costs associated with granting stock options to employees. This includes tracking the cost of those grants, the residual income arising from any changes in the market value of underlying shares, and the recognition of any related tax liability or expense. When an employee exercises their stock option, companies need to bear in mind the potential for awards to have a real impact on their income statement and balance sheet. By creating timely entries that accurately reflect these transactions, businesses can be sure that their books are accurate and up to date.