Wages

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion


In your T Account for wages control

Do you have to CR the gross and the DR the net pay?

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Wages
    confused!! wrote:

    In your T Account for wages control

    Do you have to CR the gross and the DR the net pay?

    No, the other way around! I'll use a numerical example,

    Debit entries might be;
    Direct labour (gross wages); £5700
    Direct employers national insurance; £500
    Total; £6200

    This is the total cost of wages to the company and the debit balances will show as an expense in the Profit & Loss account.

    Credit entries will be;
    PAYE tax; £800
    PAYE employees national insurance; £400
    PAYE employers national insurance; £500
    Net wages to employees; £4500
    Total; £6200

    Any attachment of earnings orders or other deductions will also show here e.g. Joe Bloggs deducted £20 would reduce the net wages to employees figure by the same amount i.e. to £4480

    The credit entries will show as liabilities on the balance sheet until you pay them. You pay your employees their £4500 net wages weekly or however frequently while the £1700 PAYE is to be paid to the Revenue by the 19th of the month following the end of the relevant pay period i.e. PAYE for the pay period 6th July to 5th August must be paid by the 19th of August.

    Hope this helps?

    Regards,

    Robert
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Wages

    Hi,

    I think this done slighty different from company to company, the journals I would post for wages would be as

    Gross Wages
    Dr Wages & NI Expense
    Cr Wages Control

    Employers NI
    Dr Wages & NI Expense
    Cr Wages Control

    Total NI & Tax deductions
    Dr Wages Control
    Cr PAYE & NI Liability

    Net Wages
    Dr Wages Control
    Cr Bank

    The above entries I think should balance the wages control A/c and leave a Cr balance for PAYE & NI.
    Hope this is ok :?
    crispy
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Wages

    im sure first post is right as bank is credit bank and db net wage control as shown in 1st example so rest of post confusing.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Wages


    Yes, Crispy's method is also right - showing the separate journals for each whereas my own method assumed electronic rather than manual bookkeeping and uses just the one journal. Using my example figures from above, both methods end up with;

    Debit total cost of wages expense (P&L); £6200
    Credit PAYE liability (Balance sheet); £1700
    Credit net wages liability (Balance sheet); £4500

    I didn't show payments for the liabilities since I assume that everyone understands to credit the bank while debiting the net wages and PAYE accounts.

    Regards,

    Robert
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Wages

    so your answer orignaly wrong then robert?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Wages

    No Robert's answer is right.

    Robert's answer gave the wages journals from a real-life scenario rather than an examination/study scenario.

    Crispy's answer is also correct but (as Robert has quite rightly pointed out) refers to a manual bookkeeping system. In today's computerised-bookkeeping age Robert's method is more widely adopted.

    Again, Justly, before making assumptions that posters are wrong, I would strongly advise that you ensure you have full knowledge of the subject matter in question.

    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Wages

    Hi

    Thank you all for your replies, I managed to get it all right in my simulation in the end!

    Thanks again

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