Wages journal

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If you have the Sage Payroll you can set this up to be done automatically from the payroll. We assume this is not the case. The Wages journal is used to correctly record the actual cost of employment in the accounts. There are three components to the journal, the money paid to the staff, the money paid to the Tax man and the cost of employment (the sum of staff and revenue payments)

For example the cost of Tax and National insurance are posted to an account (2210) the total of staff payments are posted to the Net Wages account (2220) and the actual cost is posted to Gross Wages (7000). When the bank payments are made to employees they are made against 2200, when all wages have been paid the account should have a balance of 0, confirming no mistakes have been made. Similarly Tax and NI are paid against 2210 and the account should return to 0.

In practice Tax and NI may be recorded in separate accounts and the Gross wages may be split into multiple different accounts for different types of employees and different types of pay, you may want to see holidays, overtime, directors, production staff, and office staff in different parts of the accounts. These journals can therefore be quite complex in terms of how they are split but the fundamental principle is simple.

If you do want complex splits it may be worth having the payroll. For less complex arrangements journals can be memorised and recalled each month.