29 Apr 2015
April 29, 2015

How to post your Salary Journal

2 Comments

When doing bookkeeping training one of the most common errors I come across is the incorrect posting of the salary journals.  You need to accurately reflect the cost of your wages in your accounts, and this normally includes the gross salary for your staff plus the employers national insurance, and increasingly, especially with auto enrolment, the cost of your employers pension too.

The common mistake is to post your cheques paid to staff and your cheque to the HMRC straight into the wages costs area of your profit and loss account.  In Sage that would be to codes in the 7000 range.  This will get you by, but wouldn’t you rather learn how to post the journals properly?

Correctly Posting your Salary Journal

All journals need to have matching debits and a credits in double entry bookkeeping, and the salary journal is no exception.  Usually the wages are run a few days before the wages are actually paid, and the tax and national insurance are not due to be paid until the 19th of the following month.  This means the costs of the wages should be posted to the profit and  loss account, and the planned net wages and any tax or pension payments should go in the balance sheet  until they are paid.

If you have any student loans to collect and pay to the HMRC then I would add this to the PAYE total in the journal, as the figure is added to the PAYE in the P32 form which tells you what to pay the HMRC and is included in the payment to the HMRC.

An Example Salary Journal in Sage

This is an example of a simple wages journal in Sage 50 Payroll..  There are codes in the balance sheet also for attachment of earnings if these are to be deducted from net pay, and If you are a small employer eligible to reclaim any Sick Pay, Maternity Pay or Adoption Pay in the month this can be posted to the PAYE/NI account to reduce the payment being made to the HMRC.

Recording your Wages and HMRC Payments

When you actually pay your staff this bank payment should then be entered to the same code as your Net Wages (2220 in Sage)  This means at the end of each month after the wages are paid this account in the balance sheet should be zero.  If it is not then there is something wrong in the accounts.

The payment of PAYE/NI to the HMRC should be posted to the PAYE/NI account (2210 in Sage).  When you first install Sage there are usually separate PAYE and NI accounts, but these should be consolidated into one as the HMRC like to have one payment with the totals combined, and you don’t want to have to split your payment when made into two different accounts.

Payment made to the pension fund should be made to the balance sheet pension fund code (2230 in Sage), which should be the total of the employees and employers contributions added together.

Automatically Posting Your Wages

If you use Sage Instant Payroll or Sage 50 Payroll however you can use the Nominal Link to automatically post your wages from Payroll into Sage 50 Accounts or Sage Instant Accounts using the Nominal Link.  This can save a lot of time and effort and reduce the scope for human error.

Sage 50 Payroll Nominal Link Settings

The examples given are in Sage 50 Payroll but the same theory applies whatever software you use.  We can supply and install  Sage One and Xero payroll too, or help with the HMRC basic payroll tools too.

With the right software and the right training running your own payroll doesn’t need to be a complicated job.  If you need some help getting started, or some refresher training to get the automated nominal link set up then please get in touch.

2 Responses to How to post your Salary Journal
  1. Can anyone tell me why my sage payroll Nominal Keeps coming up (there are incomplete postings for 28.12.2017 these need to be posted first)
    These have already been posted it comes up each month how do I stop this.

    Thanks

  2. sbwordpressadmin March 6, 2017 at 3:57 pm Reply

    Jane, I would need to know exactly which software you are running and what you are doing when you get this error message – a screenshot would be useful too if possible. You can email me on sage@siliconbullet.com if you would like help with this.


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