Unit 2 -wages

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I hope someone can help me here. I am doing an exercise on wages in which I am given the gorss wages, employer NICs and Employer pensions. There is no net wages or employee costs. I have to separate this into department categories such as A, B, and C. I have a work analysis done, but I'm not sure how to do the T-accounts since I don't have net wages or employee deductions. The total gross wages are 17,615. Employer's NICs are 4,592. Employer Pensions are 2,602. Can someone help me get my head around this?

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Unit 2 -wages

    <BR>Your wages journal should be Dr cost in the p&l and Cr net pay and deductions to the liability in the balance sheet.<BR><BR>The cost to the employer is the gross plus employers contributions - any deductions from the employees pay still has to be paid to the IR, so therefore it is still a cost.<BR><BR>Therefore, to do your analysis of departmental costs, you only need the gross and the employer contributions, because this is what goes to the p&l expense account.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Unit 2 -wages

    yikes!! I am now more confused if I thought that was possible. I am only on Unit 2 and my books don't even start on P&L in that unit. All my options are is to record to the following t-accounts: cash,wages control account, NIC creditor, pension, Department A, Department B, and Department C. I'm not even given the net wages either. Would I put the gross wages(with employer costs ) as a credit and just the gross wages as a debit in the wages control account?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Unit 2 -wages

    I wouldn't worry about journals and P&L accounts just yet. Journals you'll come to know and love (not) in Unit 3. P&L and balance sheet accounts can wait til you're doing Intermediate. <BR><BR>What I would do is write up the T accounts as far as you can with the information given. So, debit the Wages Control a/c with pension and employers NIC, credit it with the gross wages and fill in the Wages, Inland Revenue and Pensions accounts to complete the double entry. Not having the figures for the employees NIC and PAYE you won'y be able to balance off the accounts.<BR><BR>****I realised that's not quite right. See my next post. C*****<BR><BR>Hope that helps,<BR><BR>Chris
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Unit 2 -wages

    Thank you for your help. Can I bother you with another question on this subject now? I have to figure out the total cost of the wages. Do I actually ass the gross wages plus the employer NICs and employer pension contributions? <BR>Also, when doing my double entry, do I credit the employer NICs to the PAye/Nic account as well as the employees? I'm confused as I did a credit for the employer costs in the wages control account? Is this correct?<BR><BR>Thank you for your help <img src="i/expressions/face-icon-small-smile.gif" border="0"><BR>Amy
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Unit 2 -wages

    Sorry Amy, I got that all wrong <img src="i/expressions/face-icon-small-blush.gif" border="0"><BR><BR>Normally, you would enter all the wages costs to the debit side of the wages control account:<BR><BR><u>Debit</u><BR>Bank (net wages)<BR>Inland Revenue (PAYE, Employers/ees NIC)<BR>Pension<BR>Any other payroll deductions<BR><BR><u>Credit</u><BR>Wages (balancing figure)<BR><BR>With the figures you have you can't know the net wages, but you can still work out the balance of the control account.<BR><BR>Sorry for the earlier cock-up hope it didn't confuse you too much<BR><BR>(An embarassed) Chris
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Unit 2 -wages

    That's ok Chris - I think I may be finally getting it <img src="i/expressions/face-icon-small-happy.gif" border="0"><BR><BR>Debit - Net wages<BR> EMployee NICs/PAYE<BR> Employer NICs<BR> Employee &Employer's Pension<BR> ANy other deductions<BR><BR>Credit - Gross wages<BR> Employer's Pension<BR> Employeer's NICs<BR><BR>Is this right so far? Silly me did have the net wages on anhother page(now I am embarrassed!!<img src="i/expressions/face-icon-small-blush.gif" border="0"><BR><BR>So if this is right so far, I know the NICS/PAYE gets credited to the Inland Revenue account. Does employer NICs also get paid to the inland revenue as well? These must sound like silly questions as I look at them now, but these have really thrown me. I have everything else for my unit 2 pretty much down, it is just wages I am trying to get my head around.<BR>Thanks for your help <img src="i/expressions/face-icon-small-happy.gif" border="0">
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Unit 2 -wages

    That's just about it. The net wages will be a debit in the wages control account and a credit in the bank/cash book - you're taking the money out to pay your staff. The credit side is just the balance, with a corresponding debit in the wages a/c. NIC etc go in as credits to the appropriate accounts, these will be debited from the bank when you pay up.<BR><BR>It's useful for me to get this right too, it's been a while since I did payroll and I needed the revision.<BR><BR>Chris

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