Wage Control Account

James BellJames Bell New MemberRegistered Posts: 7
Hey People,

A rather simple question, however as usual i am looking far too indepth for an answer.

Regarding Wage Control Account.
1. How do they work, i.e. why do 'named' debit entries go into the 'debit' side, and not the credit side, and visa versa.

I fully understand other Control Accounts such as the creditors and debitors control. Just the Wage Control seems rather back to front? More of a check account than a Control Account.

If someone could just provide an example of entries that go into a Wage Control and reasoning why this is so.

Many Thnaks,

James Bell

Comments

  • crispycrispy Trusted Regular SouthamptonRegistered Posts: 453
    Hello,

    Journals for Wages (using a wages control a/c) as follows: -

    Dr Gross Wages (Expense)
    Cr Wages Control

    Dr Employer's NI (Expense)
    Cr Wages Control

    Dr Wages Control
    Cr PAYE/NI Liability A/c (For the total PAYE/NI)

    Dr Wages Control
    Cr Bank (Payment of the Net Wages)

    Posting of the above produceS a wages control a/c that should reconcile, and leave a credit balance liability for the PAYE/NI (due to HMRC).
    JayKallee
  • CullenCullen Experienced Mentor Registered Posts: 592
    In real life I have never seen a wage control account. I have always posted the expenses as a debit to the wage expense account, including employers nic and employers contribution to pension etc and the payables as a credit to net pay and paye/nic etc. The eventual payment clears these payable accounts and that is the event that "controls" wages.

    Using a control account just adds another (in my experience) unneccessary layer of difficulty.
    In the world of AAT Foundation a wage control account almost replaces net pay as Crispy has said. I would just consider the logical flow of the double entry and just have the control as the other side.
  • OrangeTop7OrangeTop7 Registered Posts: 7
    Hi

    My tutor has, unless I've misunderstood, told me to show the employer's NI, firstly as a dr in the Wages Expense account, along with the gross wages, but then also as a cr in the Wages and Salaries Control Account. A cr, in one sense, can make sense because it is paid out, but it is also liability that is shown as a cr in the HMRC account. Please could anyone clarify this for me once and for all?
  • JayKalleeJayKallee Registered, Tutor Posts: 92
    Wages control account is simply an account where all payroll transactions are posted. At the end it should always balance. Its more like a 'check' account. Try Osborne books, it explains quite clearly.
  • OrangeTop7OrangeTop7 Registered Posts: 7
    Hi
    Thank you for helping, but I know what the Wages Control account is. I'm sorry, maybe my question could have been better written.

    What I'm asking is: which side should the Employer's NI contribution go on? because I believe my tutor told me both sides and that doesn't seem right.
    Hope you are happy to clarify. Thanks again.
  • JayKalleeJayKallee Registered, Tutor Posts: 92
    edited August 2017

    Hi
    Thank you for helping, but I know what the Wages Control account is. I'm sorry, maybe my question could have been better written.

    What I'm asking is: which side should the Employer's NI contribution go on? because I believe my tutor told me both sides and that doesn't seem right.
    Hope you are happy to clarify. Thanks again.

    Emplyers NI and Pension contributions form part of 'employers cost' (ie Gross wage plus all employer contributions) This is Debited to Wages and Salaries account and credited to the Wages Control account.

    Then you Debit Wages Control account with HMRC (all NI and Tax deducted) and credit HMRC account. You do the same with Net Pay, by debiting Wages Control and Credit Bank
    You also debit Wages control with Pensions, Trade unions etc and credit Pension provider and Trade Union accounts.

    After the postings, the control account should balance. The debit balance on Wages and Salaries will be posted to your Statement of Profit and loss account and individual credit balances on HMRC, Pension and Trade Unions are be liabilities that you will settle the following month. When they are settled they are debited and bank account credited.

    Since the employers cost of wages is credited to the Wages control and the HMRC debited to the control, and both include employer NI, yes you may say they go on both side.

    Just do not confuse with money paid out or money coming in since at this stage no money exchange hand, look at them as expenses and liabilities.

    Hope this clarifies your query.
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