BOOKKEEPING COURSE: SALARIES |
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As a general rule, two Journal Entries will suffice. The first - a reference to the net payment to employees (the figures are "extracted" directly from the payroll). The second - to take into consideration the existing employer's payments (the figures are "extracted" from relevant Income Tax and Social Security forms. The Journal Entry is as follows:
The Explanations for Journal Entry No. 2 a. Salary expenses - $ 4,180 The sum has been extracted from the payroll (the gross taxable total). b. Employers' tax expenses - $ 152 The sum has been taken directly from the relevant tax forms. c. Social Security expenses This is the only amount in the Journal Entry that is not extracted from another source. This amount is arrived at using the following formula:
Comment: The three debit accounts above are normal expenses accounts. Their final destination is, of course, in the Profit and Loss Statement. d. Employees' Accounts (Nathan, Warren and Bjorn) These are normal personal accounts that are in credit at this stage, as the employees are eligible to be credited by the employer with their net salary. e. Income Tax/Social Security Deductions There are normal personal accounts in respect of the Salaries for August xx. Both the institutions (Income Tax and Social Security) are entitled to be credited by the employer with the amounts that appear in their relevant forms. Nominal Ledger Records The T accounts for the three above journal entries will look like this:
Bank Reconciliation Salaries Tax Deduction at Source Value added tax |
