Payroll

[Jon Lapham]

I have a preliminary layout for the chart of accounts for the payroll
section in the documentation.

I am hoping to get opinions about the *general* layout.  Yes, some
subaccounts could be moved up or down a level, but I am more interested 
(at this point) in people's opinions about the general layout and 
methodology.

The philosophy of this account structure is that you build "payroll
liabilities" from "payroll expenses".  Then, you pay off these payroll
liabilities from your checking account (or whatever).

Thus, you checking transactions always involve liabilities, not
expenses.  Make sense?

So, let's assume you have 2 employees (Emp1, Emp2), and you have to pay 
2 kinds of employee contributed taxes (Tax1, Tax2).  No employer 
contributed taxes for now, although it would work fine with this account 
structure.

Simple Payroll Account Structure:

-Assets
    -Checking
-Liabilities
    -Employees
       -Emp1
       -Emp2
    -Tax1
    -Tax2
-Expenses
    -Salaries
    -Tax1
    -Tax2

Now, how do you go about actually doing payroll?

============================

Step 1: Build "payroll liabilities"

Every pay period, you start by building payroll liabilities, using the
expense accounts.  So, let's assume both employees earn 100 units, and
the tax rate for employee contribution tax1 and tax2 is 10% and 5% 
respectively.

Enter the "total employee cost" (in this case, also gross salary) into 
each of the Liabilities:Employees accounts in a single split 
transaction, split amongst the proper expense accounts.

You accounts will look like this:

-Assets
    -Checking
-Liabilities
    -Employees
       -Emp1    100
       -Emp2    100
    -Tax1
    -Tax2
-Expenses
    -Salaries   170 (2x85)
    -Tax1       20  (2x10)
    -Tax2       10  (2x5)

============================
Step 2: Transfer Taxes to Proper Liabilities Accounts

Now, we are finished with expenses.  But, we need to shift some money 
around the liability accounts because the employees do not actually 
receive all that money, some of it is tax liability.

In a single split transaction, transfer from Emp1 10 to Liabilities:Tax1 
and 5 to Liabilities:Tax2.  Do the same with Emp2.

You accounts will look like this:

-Assets
    --Checking
-Liabilities
    -Employees
       -Emp1    85
       -Emp2    85
    -Tax1       20 (2x10)
    -Tax2       10 (2x5)
-Expenses
    -Salaries   170
    -Tax1       20
    -Tax2       10

============================
Step 3: Pay employee salaries, and taxes

Now, write a check to each employee, paying their net salary (85 each) 
and write 2 other checks, to the Tax1 and Tax2 agencies.  In all cases, 
the 2 account transactions go from the checking account to the proper 
liability account.

You accounts will look like this:

-Assets
    --Checking  (-200 of whatever was there)
-Liabilities
    -Employees
       -Emp1    0
       -Emp2    0
    -Tax1       0
    -Tax2       0
-Expenses
    -Salaries   170
    -Tax1       20
    -Tax2       10


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  Jon Lapham  <lapham at extracta.com.br>          Rio de Janeiro, Brasil
  Work: Extracta Moléculas Naturais SA     http://www.extracta.com.br/
  Web: http://www.jandr.org/
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