View source | Discuss this page | Page history | Printable version   
Toolbox
Main Page
Upload file
What links here
Recent changes
Help

PDF Books
Add page
Show collection (0 pages)
Collections help

Search

How to manage payroll accounting and payment

Contents

Objective

In a company, payroll is the sum of all financial records of salaries for an employee, wages, bonuses and deductions.

In accounting, payroll refers to the amount paid to employees for services they provided during a certain period of time.

Payroll plays a major role in a company for several reasons. From an accounting perspective, payroll is crucial because payroll and payroll taxes considerably affect the net income of most companies and they are subject to laws and regulations (for instance in the US payroll is subject to federal and state regulations, in Spain payroll is subject to income taxes).

Recommended articles

Payroll management requires to understand how to create the accounts that are going to be used while creating the corresponding G/L Journal entries for payroll accounting.

It is highly recommended as well to know how to create a G/L Item, as well as the way they are used in creating either a withdrawal transaction in a Financial Account.

Execution Steps

Bulbgraph.png   This articles explains an example of payroll accounting using an Spanish general ledger configuration.

In Openbravo, the company in this example may need to:

In Openbravo above described accounting requires the creation of a G/L Journal which contains the entries to be post to the ledger.

Bulbgraph.png   It is important to remark that Openbravo does not included an HHRR module by now, therefore the amounts to be registered in a General Ledger journal
need to be provided by either a financial advice company, or a consultancy company or a specific HHRR software

After that, the company in this example can make the payroll payment from the G/L Journal itself by creating a "G/L Item Payment".

Additionally, the payroll payment can also be made:

In anyway, a G/L_Item needs to be created first.

This "G/L Item" can be named "Remuneraciones pendientes de pago" according to the Spanish Chart of Accounts.

This G/L item needs to be linked to the corresponding liability account both in the Debit and in the Credit side. For instance the account (4650) according to the Spanish Chart of Accounts.

G/L Item creation

The company in this example needs to create and use a G/L Item for accounting the payroll payment transaction.
This G/L item needs to include the right "Debit" and "Credit" accounts in the accounting tab, therefore:

Going back to our example, the account to use according to the Spanish General Ledger configuration is:

G/L Journal creation

As already mentioned the company can use a G/L Journal to account and employee's payroll.

The accounting of the payroll of an employee named "MR. Smith" using a Spanish general ledger configuration looks like as shown below if having below detailed figures:

Account Debit Credit
(640001) "Sueldos y salarios" MR. Smith Pay gross:

1.096,25 EUR

(642001) "Seguridad Social a cargo de la empresa" MR. Smith Social Security paid by the company:

372,63 EUR

(476001) "Organismos de la Seguridad Social accreedora" MR. Smith Social Security paid by the company + MR. Smith Social Security paid by MR. Smith

480,81 EUR

(475101) "H.P. acreedor por retenciones practicadas" MR. Smith withholding Income Tax (8.6%)

94,27 EUR

(465000) "Remuneraciones pendientes de pago" MR. Smith Payroll pending payment:

893,80 EUR

The company in this example needs to create a G/L Journal that includes each of the accounting entries listed above as separated G/L Journal lines:

How to manage payroll accounting and payment01.png

There is a checkbox named "Template" in the G/L Journal header which allows to use the content of a G/L journal as a template.

This feature is very useful while accounting payrolls. The way to configure a G/L Journal as a template and make it works is explained here.

Bulbgraph.png   There is an Income tax report in Spain named "Modelo 190" which can be generated and submitted as a valid file from Openbravo to the Spanish tax authorities.
This file does not include Employee Income withholding as Openbravo does not manage HHRR and therefore payrolls.

Creation of the payment transaction

Mr. Smith payroll payment can be directly made from the G/L Journal used to post Mr. Smith payroll to the ledger.

The way it works is described below:

Upon G/L Journal posting the "Journal Entries Report" window is opened showing the entries posted to the ledger.

Going back to the G/L Journal, Openbravo informs about the number of payments created.

The "G/L Item Payment" is accessible from the "Line" where the checkbox "Open Items" was selected.

It is possible to navigate to the payment from the "Payment" field.

This "G/L Item Payment" is now a payment automatically populated in the Payment Out window.

This "G/L Item Payment" can be post to the ledger from the payment out window if the payment method used allows it.

"G/L Item Payment" posting looks like:

Account Debit Credit
GL Item Debit Account (465000) "Remuneraciones pendientes de pago" 893,8 EUR
"Upon Payment Use" Account 893,8 EUR

Under this scenario the "G/L Item Payment" and the "G/L Journal" are linked to each other in the sense that:

Payroll payment creation in the Financial Account

As already mentioned payroll payment can also be created in the Financial Account where the amount is going to be withdrawn. This step could or could not have fees.

The company in this example needs to:

This new transaction is then shown in the Transaction tab of the Financial Account window as a withdrawal.

The next step is to post the payment transaction.
It is possible to manually post it by using the process button Post or it could be automatically posted if the Accounting Server Process is enabled in the Process Request window.

Payroll payment posting looks like:

Account Debit Credit
GL Item Debit (465000) "Remuneraciones pendientes de pago" 8.938,0 EUR
"Upon Withdrawal Use" Account 8.938,0 EUR

Creation of a bank fee

It could happen that the bank adds a fee to be paid by the company, therefore the company in this example needs to create the payroll payment transaction in any of the ways described above and besides an additional transaction in the financial account to reflect the bank fee.

The way to do that is:

Bulbgraph.png   A bank fee can also be registered in a financial account by using a previously created G/L Item named "Bank Interest".

Bank Interest accounting could be configured as '7010 Interest income' for credit and '7020 Interest expense' for debit.

Fee transaction can also be posted same way as the payment transaction.

Fee posting will look like:

Account Debit Credit
Bank Fee Account Paid Out Amount of the fee
"Upon Withdrawal Use" Account Paid Out Amount of the fee

Result

This completes the manage and the payment of employee's payroll. As a result:

Retrieved from "http://wiki.openbravo.com/wiki/How_to_manage_payroll_accounting_and_payment"

This page has been accessed 6,052 times. This page was last modified on 11 January 2013, at 13:41. Content is available under Creative Commons Attribution-ShareAlike 2.5 Spain License.