The payroll related accounts have a confusing terminology.
On the company pay date which is the last day of the month salaries are paid so
DR Expense - P&L net salary paid to employee
CR Cash - B/S as above
no creditor should be generated as the salaries are paid as they fall due
At the same time a creditor should be created for PAYE, Eer’s NIC and Ee NIC, which is due 19th of the following month:
DR Expense - P&L as detailed above
CR Creditors - HMRC on B/S
This would then be cleared down upon payment on 19th:
DR Creditors - HMRC on B/S
CR Cash on B/S
Please advise the set up of the standard chart of accounts to accommodate this
The usual way to handle payroll in QuickFile is with a journal on the pay date that does
DR “gross wages” (P&L) for the gross pay before deductions (tax, employee NI, etc)
DR “employers NI” (P&L) for the employer’s national insurance
CR “PAYE” (balance sheet) for the amount that will be paid to HMRC (tax, employee & employer NI, etc)
CR “net wages” (balance sheet) for the net amount due to the employees
The actual payment out from the bank to the employees and to HMRC is then purely a balance sheet transaction to debit net wages/PAYE as appropriate.
NB with this setup, you want the “post net wages to balance sheet only” setting to be “on” in your account wide settings, so the bank tagging for “salary payment” goes to the right place. Alternatively if you know the net wage payments will always appear on your bank statement exactly on pay day (you don’t have to send them two days early for bacs) then you can put the net straight to CR bank in the original journal, bypassing the net wages balance sheet entry.