Wages (P/L ac) Vs Wages Control Account

[Serg]

Hello,

I am retraining with bookkeeping and arrive to the point of payrolls. What I do or used to do is double entry system ie:

Cr Wages Gross (P/L ac)
Cr NIC 's (P/L ac)
to
Dr Wages Net (Liabilities)
Dr PAYE (NIC 's + 'ee) (Liabilities)


Now I have seen the Wages Control Account that operates as:

Dr Net Pay
Dr NIC 'ee + 's
to
Cr Gross Pay
Cr NIC 's

I cannot see the double entry of this account, as is exactly the P/L but in the other way. Could anyone explain it?

Many thanks.

 

[Scalloway]

I don't follow your first example. Why are you crediting wages to P & L, instead of debiting?

 

[Serg]

Sorry to be wrong, you are right.

Dr Wages Gross (P/L)
Dr NIC 's (P/L)
to
Cr Wages Net
Cr NIC 's + 'ee


When it is paid everything balanced off, so no Blce carried down. OK!!!

Now the 2nd example??

 

[Scalloway]

The debits in the second example set up the expense in the P&L. I assume deductions includes PAYE if applicable. The credits set up the liabilities in the Balance Sheet, which are removed when the employees and HMRC are paid.

 

[Serg]

How can you explain this with the double entry system? I cannot see it without it...

- Debits set up P/L ac ??
If I Debit my Wages Control Account how can I set up Dr in P/L account at the same moment? Even the concepts to appear in P/L account are Wages Gross and my NIC 's as an employers.

- Credit set up Liabilities in the Blce Sheet ??
Again do not see how it can appear as a liability my Wages Gross!!! (= Net Wages + NIC 'ee) as the quantity to pay to the employee has to be NET. Later I will pay off my liabilities with the HMRC.

Don't see the use of this account?? Do the accountants use which method??

 

[Scalloway]

To put the wages through the ledger I would do the following journal

Dr Wages Gross (P/L)
Dr Employer's NIC 's (P/L)

Cr Net Wages
Cr HMRC Creditor

Then the Wages payment would be debited to Net Wages
The payment of Tax and NI would be debited to HMRC Creditor
This would zero these accounts

 

[Caspar]

I always find that if you try an example with figures in it can help to make sense of it all.

Gross pay 1000
Tax deducted 41.40
Employee NI 42.48
Net Pay 916.12
Employer NI 49.54

Journals to P&L
Debit
Gross wages control 1000
Employer NI 49.54
This debit column totals 1049.54

Credit B/S
Net wages control 916.12
Paye as three figures 41.40, 42.48, 49.54 (total paye 133.42)
This debit column totals1049.54
This is all the double entry.

However you will have a balance showing on your b/s until you pay your net wages out in full and until you pay your Paye over to HMRC.

You will credit bank debit the b/s item to zero it out.
Kind regards
Caspar