Hi there - its me again. I work for a very small company and there's only me in the Accounts Department so was wondering if someone can help me!
The way in which PAYE/NI is recorded in our accounts - CR Bank and DR NI/PAYE Liability. This is then journalled CR NI/PAYE Liability to relevant NI expense account. I do it this way as its the way it has been done historically.
My problem is during 09/10 there were 3 months when the PAYE/NI was not paid to HMRC - how do I show this as a liability - because I need to show it as a debit entry in the Liability account - but not sure as to what account I credit.
I might be barking up the wrong tree, but if you haven't actually paid it then it needs to be shown going back into the bank account. Therefore I would suggest CR Bank and DR PAYE/NI.
I await the opinion of others though, as it's getting late in the day.
The views expressed in this post are my own personal (HRA protected) views, and are not representative of any organisation I have any involvement with.
Dr Wage expense account Cr HMRC (tax and ee/er/ni) Cr Net pay account
The two Cr accounts are both liability acc's as these amounts are outstanding until paid.
When the wages are paid you then Dr net pay and Cr bank. When you pay HMRC you Dr HMRC and Cr bank. Therefore if the payment to HMRC does not happen the liability continues to sit there until the payment is made.
You wouldn't show a bank payment in the accounts until it had actually been made.
In your case I assume that your bank closing balance is now wrong?
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
Thank you for both your replies. That makes sense. My company has been doing it in a haphazard way and confusing me! The bank balance wasn't wrong because cheques weren't issued and it wasn't showing in the NI liability and I couldn't work out what my journal shoud be!
