Which Accounts to record unpaid salaries to Employees?

[Maf. King]

On Tue 1 April 14 16:55:00 Zhong Ayi wrote:
> I am running GnuCash for a Business and so have many Business related
> accounts. My business is running at a big loss and I need to record
> salaries as a type of Account Payable because I need to record that I owe
> employees their salaries but I can not pay them now.
> 
> Is the best way to record this type of transaction as a Account Payable and
> treat employees as Vendors? How should I record in the future maybe a
> partial payment to them if I start paying a little at a time, and what do
> you suggest I do as the months accumulate and their unpaid salaries also
> increase? I am confused about what accounts these should best be placed
> inside.
> 
> Thank you for your keen ideas.

Hi,

How you handle this really depends on how your government requires that you 
account for employee taxes and other deductions. I can see that you would 
either handle deductions when the payment is actually made, or on the date 
that you "promise" the money to your employee.  (You could be deemed to make 
payment then, and the employee loans it straight back (less tax...))

My advice is to get professional advice from an accountant who is familiar 
with your local rules.

Having said that, in the UK, my instinct is to keep track using a spreadsheet 
outside of GC... (but I would have to check the tax position with my 
accountant!)

IMHO, if you were to fudge this into GC, Vendors and A/P is not the way 
forward.  Just a normal liability account (Liability:UnpaidSalary - possibly 1 
subaccount per employee) is the way to set up within GC... but I'm not sure 
what you would use as a transfer account - probably something under Equity?

Then when you eventually make payment, transfer from bank to expense:salary 
and liabilty to equity in a "multi-split monster" transaction.

HTH,
Maf.