Payroll

[Phil Longstaff]

On Sun, 2003-07-27 at 11:04, Derek Atkins wrote:
> Phil Longstaff <plongstaff at newearth.org> writes:
> 
> > Disclaimer: IWNEAAABIANWAO (I was not educated as an accountant but I am
> > now working as one)
> > 
> > On Wed, 2003-07-23 at 11:14, Derek Atkins wrote:
> > 
> > > Why can't you have a transaction that looks like this:
> > > 
> > > 2003-01-15      Derek Atkins
> > >                 Expenses:Salaries               $85
> > >                 Expenses:Tax-1                  $10
> > >                 Expenses:Tax-2                  $5
> > >                 Liabilities:Tax-1       $10
> > >                 Liabilities:Tax-2       $5
> > >                 Assets:Checking         $85
> > > 
> > 
> > Unfortunately, this is wrong.  For one thing, the proper amount to hit
> > Salaries with is the gross salary. 
> 
> That would artificially inflate your expenses!  If you put the full
> gross salary into Expenses:Salaries then you'd have expenses of $115,
> when in reality you only have expenses of $100 (assuming no company
> payroll taxes).

If my company pays an employee $50,000 in gross salary and an additional
$5000 in employer taxes, then the cost to me is $55,000, regardless of
how the employee's $50K gross salary is split into taxes and other
withholdings.  The expenses I have are the $50K salary, and the $5K
employer taxes.

> 
> >   Secondly, the various taxes or other
> > things withheld from my gross salary to produce my net salary are not
> > liabilities for the company.
> 
> This is not true, either...  When you withhold taxes from your
> employees that is DEFINITELY a liability -- it's money you still have
> which you owe the gov't.  That certainly sounds like a liability to me
> (sort of how A/P is a liability!).  When you pay the gov't the withheld
> taxes then you pay down the liability.

I reread what I wrote, and you're right.  I meant to say "the various
taxes ... are not expenses for the company".  If the company holds them
to pass on to the gov't, they are liabilities at that point.

> I'll repeat here what I've said elsewhere: GnuCash DOES NOT DO
> PAYROLL.  You are welcome to account for it however you wish, but do
> NOT expect GnuCash to be able to maintain enough information to, say,
> write a W-2 at the end of the year.  GnuCash does not keep around
> enough information for this.

However, given double-entry accounting, it should be straightforward to
set up accounts to allow you to generate W-2's (you'd need a deep enough
account hierarchy to allow you to keep info per employee).  I agree that
functionality on top of the basic double-entry accounting makes the job
easier.

> > If I have a gross salary of $100 from which $10 needs to be withheld for
> > tax1 and $20 for tax2, then we have:
> > 
> >                                DB          CR
> > Expenses:Salaries            $100
> > Liabilities:Tax1                          $10
> > Liabilities:Tax2                          $20
> > Liabilities:Employees:Phil                $70
> 
> And now you're contradicting yourself.  You earlier said "the various
> taxes or other things withheld from my gross salary to produce my net
> salary are not liabilities for the company" but here you are making
> them liabilities!  So, which is it?

See above.  I mean't they aren't expenses (to the company).

Phil