Details of a business’ payroll for the last month are as follows:
|PAYE income tax||£3,844|
|Employees’ pension contributions||£644|
|Employer’s pension contributions||£214|
The journals to record the above information are detailed below.
Step 1 Recording the total cost of the payroll
The payroll cost for this example is £29,186 which is calculated as the total of the gross pay (£26,987) , the employer’s NI (£1,985) and the employer’s pension contributions (£214).
Step 2 Move the amount payable to HMRC out of the Wages Control a/c
The total payable to HMRC for the month is £7,622 which is calculated as the total of PAYE income tax (£3,844), employees’ NI (£1,793) and employer’s NI (£1,985).
Step 3 Move the amount payable to a Pension Fund out of the Wages Control a/c
The total payable to Pension Funds is £858 which is calculated as the total of employees’ pension contributions (£644) and employers’ pension contributions (£214).
Step 4 Move the Other Deductions out of the Wages Control a/c
Entries in the General Ledger accounts
The above journals would be recorded in the General Ledger accounts as show below.
As payments are made to employees we will post the amounts to the debit side of the Wages Control account (and to the credit side of the Bank or Cash account). Payments to HMRC will be debited to the HMRC account, payments to the pension fund(s) will be debited to the Pension Fund account and so on.