Wages & salaries control account

Pickle
Pickle Registered Posts: 8 New contributor 🐸
in General discussion
Help!!!!

Got my Unit 2 simulation tomorrow and I've done the practise simulation from this website. Only trouble is that in the wages & salaries control account the Credit side shows the gross pay (total cost to business) without including the employers NIC contribution. This has also been listed on the debit side of the wages expense account.

According to my tutor the total cost (ie net pay+paye+employers & employees NICs) is one entry (CR) on the control account and one entry (DR) on the expense account.

We list separately on the DR side of the control account for net pay, PAYE, employee's NIC and employers NIC.

Which is right????
:crying:

Comments

  • Rikos
    Rikos Registered Posts: 1 New contributor 🐸
    I am also unsure of this, I need to know this for the skills test but have not this before. In practice i came up with a debit balance on my control account which i have to analyse explain whats it made up pf and then show how to correct it.
  • pernickety
    pernickety Registered Posts: 47 Regular contributor ⭐
    Wages and salaries

    Wages and salaries (net pay element ONLY) is money owed so is shown on the credit side as a liability(along with all the other liability accounts of VAT, PAYE etc.

    Gross pay should not go near the control account, as GROSS pay is a business expense and should therefore be debited in the expense area, along with employers NIC. I usually have a separate account for employers NIC, so as not just simply lumped with gross pay. Both of these will be in the same area along with all other business expenses such as postage, electricity etc.

    So, the journal entries:- Debit gross wages,(expense) debit employers NIC (These are the only business expenses of the journal, the rest are a liabilities; obviously, as money owed to employees or HMRC. NIC (ER's & EE's) and PAYE deducted (REMEMBER PAYE IS MONEY OWED FROM THE EMPLOYEE, THAT THE COMPANY ARE HOLDING READY TO PAY OVER from the liability area. When paid over to HMRC,(and wages paid) bank is credited and NIC/PAYE and Net wages control are debited, which will either zero or at least reduce all these liabilities of the business depending whether monthly posted or weekly.

    Hope this helps.
    :ohmy:

Categories

Privacy Policy