Help with payroll journal entries

[scedminc]

Hi,

I wonder if someone could please help me with something that I have a feeling is probably quite simple but which I cannot seem to get my head around.

I am trying to account for my payroll through journal entries and have managed to enter the info correctly as below:

Gross dr
Employers NI dr
PAYE/NI dr
Net Wages cr

Now to me all these figures seem good except with I try and account for the actual payment made from the bank account.

The data I take and the journal entry is made from the report generated by sage instant payroll.

My thoughts were that I would dr the bank account and cr net wages but this would just double the figure in net wages.

So my question is how do I show the net wages being paid from the bank account???

Thanks in advance.

 

[elaine@cheapaccounting]

Entries would be

Debit wages and salary with the gross plus the employers NI

Credit bank - net

Credit PAYE control account with the tax, NI ees and NI ers

When you pay NI:

Debit PAYE control
credit bank

simples

 

[scedminc]

simples

Not lol

Sorry but i'm still confused. Was what I wrote in my first post incorrect??

I dont get the bit where you say credit bank - net.

My head is starting to hurt with this now. Maybe I am stupid after all

 

[elaine@cheapaccounting]

Sorry but i'm still confused. Was what I wrote in my first post incorrect?? - Yes

I dont get the bit where you say credit bank - net. - well that is what is paid isn't it

My head is starting to hurt with this now. Maybe I am stupid after all - I will leave you to answer that one


Seriously though - answer with double entry as that is what you quoted. So I assumed you understood it.

Give me an idea of your background so I know how to explain it to you.

 

[scedminc]

Basically I do all my bookkeeping myself but do not have much knowledge of entering journal entries. I use sage instant payroll and it has given me the posting to make in my accounts package. I have done a journal entry as it says but does not mention about making payment from the bank account.

In my head I thought that for example I would take from the bank account say £100 which would be the wages paid to the employee and post it to net wages but I cant as that amount it already in net wages as per the journal entry entered from the payroll report.

What I dont get aswell is why would I credit the bank when Im wanting the payment to come out of it.

 

[Deleted member 9840]

SCEDMINC,
I struggled with this for ages so I have done an "a,b,c guide for me" for my own reference, that I use every month, PM me your e-mail and i'll send it to you when I get in the office in the morning.

Steve

 

[RAL]

The simple Jouranl would be

Debit Gross Wages £1000
Debit Employers NI £128
Credit Net Pay £690.00
Credit Paye & NI £438



When wages are paid, you
Debit Net Pay £690.00
Credit bank/cash £690.

And you pay paye and Nic journal would be
Debit Paye & Nic £438
Credit bank £438

So your control account net pay and Paye & Nic should go to zero.

HTH

 

[scedminc]

The simple Jouranl would be

Debit Gross Wages £1000
Debit Employers NI £128
Credit Net Pay £690.00
Credit Paye & NI £438



When wages are paid, you
Debit Net Pay £690.00
Credit bank/cash £690.

And you pay paye and Nic journal would be
Debit Paye & Nic £438
Credit bank £438

So your control account net pay and Paye & Nic should go to zero.

HTH

I get the first bit but don't understand why I credit the bank account as I want the money to come out of the bank account when I pay the employee the actual money???

 

[David Griffiths]

I get the first bit but don't understand why I credit the bank account as I want the money to come out of the bank account when I pay the employee the actual money???

In a double entry system, if the bank account has a debit balance it means that there is money in the bank. If it shows a credit balance, then the account is overdrawn.

If you don't understand that, then you are going to struggle with the entries.

A payment from the bank is Dr expense, Cr bank

 

[scedminc]

In a double entry system, if the bank account has a debit balance it means that there is money in the bank. If it shows a credit balance, then the account is overdrawn.

If you don't understand that, then you are going to struggle with the entries.

A payment from the bank is Dr expense, Cr bank

At long last I have finally done it. This post made it click and now I finally understand.

A great big thank you to everyone that helped out

 

[lolyoung1]

Hi Steve, please send your abc guide (payroll jrnl's) and any help you may have on which 'T' accounts this information should be put into.

Thanks

SCEDMINC,
I struggled with this for ages so I have done an "a,b,c guide for me" for my own reference, that I use every month, PM me your e-mail and i'll send it to you when I get in the office in the morning.

Steve

 

[elaine@cheapaccounting]

This thread is over two years old and Steve hasn't been on here since June last year