How do I record staff's accured lholiday pay from last year in Xero

[Justin B1212]

We are due to start working on our company's annual accounts, one of the staff members has £1230 unpaid holiday pay from last tax year. We are using Xero as accounting software and HMRC's PAYE tools to submit RTI.

I was wondering how I could enter the £1230 accrued holiday pay in Xero, so this figure will be considered when the net profit is worked out. Thank you very much for your help.

 

[NicoJ]

Journal - dr accrued holiday pay in the p&l (I would make a separate code to wages to highlight what it is) and cr accruals.

 

[UK Contractor Accountant]

When is the holiday pay accrual going to be paid ad this can have affect on the corporation tax charge for the year.

I assume they are allowed to roll forward holiday days not taken- check employment contract.

 

[Justin B1212]

Journal - dr accrued holiday pay in the p&l (I would make a separate code to wages to highlight what it is) and cr accruals.

Thank you for your answer, could you please let me know what code you would recommend? So should I create a journal, set up £1230 as a direct wage and then £1230 as “accrued unpaid holiday pay”?

 

[Spur Support Services]

Thank you for your answer, could you please let me know what code you would recommend? So should I create a journal, set up £1230 as a direct wage and then £1230 as “accrued unpaid holiday pay”?

I would set up a new "Overhead" code at "481" if available. Default "No tax" and don't tick any of the boxes

When raising the adjustment raise it as a reversing Manual Journal, with a posting date of the last day of your financial period and a reversing date of the first day of your new financial period
(you could choose a later reversing date based on when you expect the holiday to be taken).
A reversing Manual Journal is just a normal journal, but with the reversal date at the top right completed.

I hope this helps

 

[Justin B1212]

I would set up a new "Overhead" code at "481" if available. Default "No tax" and don't tick any of the boxes

When raising the adjustment raise it as a reversing Manual Journal, with a posting date of the last day of your financial period and a reversing date of the first day of your new financial period
(you could choose a later reversing date based on when you expect the holiday to be taken).
A reversing Manual Journal is just a normal journal, but with the reversal date at the top right completed.

I hope this helps

Thank you so much, it is much appreciated; could I please double check if the following details on the manual journal is correct.
Narration
Accrued unpaid holiday pay
Date 30th of April, 2020
Auto reversing date 1st of Feb,2021
Debit GBP Credit GBP
Accrued unpaid holiday pay 320 - Direct Wages No VAT 1230.00
Accrued unpaid holiday pay 481 - Accrued unpaid holiday pay NoVAT 1230.00

 

[Justin B1212]

I would set up a new "Overhead" code at "481" if available. Default "No tax" and don't tick any of the boxes

When raising the adjustment raise it as a reversing Manual Journal, with a posting date of the last day of your financial period and a reversing date of the first day of your new financial period
(you could choose a later reversing date based on when you expect the holiday to be taken).
A reversing Manual Journal is just a normal journal, but with the reversal date at the top right completed.

I hope this helps

Could I please check the direct wage on the reserve journal is a credit item and the accrued unpaid holiday pay is a debit item? Thank you so much.

 

[Scalloway]

Could I please check the direct wage on the reserve journal is a credit item and the accrued unpaid holiday pay is a debit item? Thank you so much.

Yes. The reversing entry should delete the creditor balance and reduce the amount of wages appearing in the P & L.

 

[Spur Support Services]

Thank you so much, it is much appreciated; could I please double check if the following details on the manual journal is correct.
Narration
Accrued unpaid holiday pay
Date 30th of April, 2020
Auto reversing date 1st of Feb,2021
Debit GBP Credit GBP
Accrued unpaid holiday pay 320 - Direct Wages No VAT 1230.00
Accrued unpaid holiday pay 481 - Accrued unpaid holiday pay NoVAT 1230.00

Apologies for not responding yesterday.
Both the accounts above are P&L accounts. To form the accrual, you initial journal should be DR 481 (or create a new account in the Direct Cost 3** area if you prefer), CR 805 Accruals.

I would advise against posting to the Direct Wage or Salary account, as it is better to retain those accounts for Payroll postings.

 

[Justin B1212]

Apologies for not responding yesterday.
Both the accounts above are P&L accounts. To form the accrual, you initial journal should be DR 481 (or create a new account in the Direct Cost 3** area if you prefer), CR 805 Accruals.

I would advise against posting to the Direct Wage or Salary account, as it is better to retain those accounts for Payroll postings.

Thank you so much for your explanation, now I completely understand, it is all sorted out

 

[Justin B1212]

Yes. The reversing entry should delete the creditor balance and reduce the amount of wages appearing in the P & L.

Thank you so much for your advice