Which Accounts to record unpaid salaries to Employees?

[Maf. King]

On Tue 1 April 14 21:22:59 Zhong Ayi wrote:
> Thanks for your advice. Actually I forgot about the social benefits. We are
> in Hong Kong so it is relatively simple since we only have 2 things need to
> pay: "Employee1 Salary" and "Employee1 Social Insurance". So there is no
> tax or anything else (HK is great place to do business!). So even if we do
> not pay Employee1 Salary this month, we still always pay the Social
> Insurance to the government that month.
> 
> OK I understand your idea about putting it in Liability:UnpaidSalary and I
> like that idea for making separate for each employee, but then when it gets
> to that monster split I fear about screwing up multiple places in my
> accounts. There must be an easier way.... maybe I go back and treat each
> employee from the beginning as a vendor and then treat their individual
> social insurances (which always stay 5% of their salary) as another Expense
> and/or Liability.... but then I guess that is the same thing as your idea
> and eventually still need a monster split eh? Very confusing :(
> 



Ok.  HK social insurance sounds like this will be straightforward, with not 
many splits needed.

How about this:
On "payment" day: (this is viewed from Expense:Salaries account)

Gross Pay		Exp:Salaries	£100		-
Social Insurance  Liab:SocIns		-	£5
wages not paid	  Liab:UnpaidSalary 	-	£95

Then at some point, you pay the government their 5%, a simple transfer from 
Bank to reduce the Liab:SocIns account (in the UK, I do that quarterly)

Some time later, you can pay partial wages to the employee,  again, a transfer 
from Bank to reduce the Liab:UnpaidSalary

When you eventually can pay wages at the correct time, the split I've shown 
above will be the same as shown, but the last line changed to "wages Paid  
Bank:current   -	80"

HTH,
Maf.



> On Tue, Apr 1, 2014 at 6:19 PM, Maf. King <maf at chilwell.net> wrote:
> > 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.

-- 
Maf. King
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