Recording first wage in accounting software

[Deleted member 25779]

Hello,

I have registered myself as a company and would like to record in my accounting software(Xero) my first wage, I am employed by the company(partnership).

Would it make sense to setup an account called "Employee's wages" and set it up as a liability rather than an expense?

Also the national contributions should be recorded as an expense or liability too?


Thanks,

 

[TimCaprica]

Xero by default should have all the accounts you need. Assuming you haven't used Xero for Payroll reporting to HMRC you need to do a manual journal (which can be scary for non-accountants). You would make a journal that looks like this:

Debit Salaries - Your gross pay (eg. £1,000)
Debit Employrs NI - Your employers NI (eg. £100)
Credit Wages Payable - Your net pay (eg, £800)
Credit PAYE Payable - The tax due to HMRC (eg £300)

Alternatively if you don't want to get involved with journals you could on the bank reconciliation just post the amount paid to yourself to the account 'Salaries' and then the amount paid to HMRC to 'Employers NIC'. Though bear in mind that whilst this simple method will be good enough for your month to month reporting, come the end of the year you will need an accountant to correct it.

So the gross pay and employers NI should go to the P&L and then amount owed to you and HMRC should go to the BS.

If you are using Xero for payroll reporting then ignore all the above and just post the amount paid to yourself to the account called Wages Payable and the amount to HMRC to PAYE Payable. You should not have to setup any new accounts, they are all there by default.

 

[David Griffiths]

Hello,

I have registered myself as a company and would like to record in my accounting software(Xero) my first wage, I am employed by the company(partnership).

Would it make sense to setup an account called "Employee's wages" and set it up as a liability rather than an expense?

Also the national contributions should be recorded as an expense or liability too?


Thanks,

You say that you are employed by the "company/partnership" Those are two different things, so you need to be precise about whether you have a limited company or a partnership.

 

[Ola1]

Is it an LLP by any chance ?

 

[David Griffiths]

Is it an LLP by any chance ?

I can't find my crystal ball!

 

[Deleted member 25779]

Thank you for the replies.

I am not actually in UK but Malta, the reason I come on this forum is because the accounting is very similar in both countries + there are no forums as good as this one for our island.

The reason I precised that I am in a partnership is because here, if you are the sole owner you become self employed, if you are in a partnership you become an employee(as a director), I believe that in the UK it is similar.

Now regarding the NI, here the company has to pay 10% and the employee 10%, I am thinking about using your method of creating:

Debit Employers NI--> Set both a liabilities in the chart of account
Debit Employee NI --> Set both a liabilities in the chart of account


My current calculations will be simple, only the NI has to be paid because my wage will be below the taxable monthly threshold. So all I need is an entry for my wage and 2 entries for the NI employee + NI employer.

Where I am confused is about the above area of Xero, I need to setup something called "Pay Item", I was going to choose "wages" which is set as a liability in the liability account but instead this dropdown menu only shows the expenses accounts. I recreated a new "5000 expense" account here thinking I should perhaps add a wage expense account in this section + 2 NI expenses account in the "account and contact" section.

Would this be fine?

I do not understand why Xero has a "Wages Payable" account setup in number 803 that cannot be chosen from this dropdown menu.


Thank you in advance for your help.

 

[David Griffiths]

If you actually said that you were in Malta then people wouldn't have to waste their time trying to find out more information so they could help. That's not the first time that you've done that

And you are wrong in saying that if you are a partner you are treated as an employee of the partnership in the UK. The systems appear to be less similar than you think.

 

[UK Contractor Accountant]

Is there any UK NI on non-resident directors pay?

Or am I reading this wrong - the company & director are both based in Malta?

 

[Deleted member 25779]

ok david just close the thread please,delete it, I did not expect that posting from another country would cause you so much frustration...I was only asking about a single page in Xero and not about laws or taxation related to Malta. Timcaprica helped a lot, sorted now. I won't post here again. I used to live in the UK and used your forum for many years, this is why I kept posting here as I used to like the discussions as I know many expats use it from abroad.

 

[john1989]

I think you are taking a risky approach seeking advice from a UK website. The advice you receive might not be relevant or completely wrong because people will assume that we are talking about a UK company.

You should link up with an accountant in Malta who can provide support as and when you need it.

 

[Deleted member 25779]

no worry it is sorted...