{m}.{s}.1The total salaries cost to the employer is £1,102, so this is the amount that must finish up in the expense accounts. This can all be included in the Wages & salaries account, but it is clearer if we open a new account for Employer's NI.

The amount the employer is due to pay to HM Revenue & Customs is £345. This will not be paid immediately, but should be paid over during the next month. In the meantime, HM Revenue & Customs will be a creditor or liability of the business. We will open a new account to record this liability - HM Revenue & Customs - PAYE & NI.

We will now record the salary figures in the T accounts.

Gross 1000   Paid to employee 757   757
      Due to HMRC 243 }  
          345
Employer's NI 102   Due to HMRC 102  
  1,102     1,102   1,102
 
[{m}.{s}a]

Step 1

September: The net pay of £757 is paid to the employee.

Debit: Wages & Salaries (expense)

Credit: Bank (asset)

Bank
       
    Sep Wages & Salaries 757
       
       
       
Wages & Salaries
       
Sep Bank 757    
       
       
       
HM Revenue & Customs
       
       
       
       
       
Employer's NI
       
       
       
       
       

 

Step 2

September: The £243 deducted by the employer has become a liability.

Debit: Wages & Salaries (expense)

Credit: HM Revenue & Customs (liability)

At this point we have recorded a total expense of £1,000 and total liability of £243. We must also record the employer's NI.

Bank
       
    Sep Wages & Salaries 757
       
       
       
Wages & Salaries
       
Sep Bank 757    
Sep HMRC 243    
       
       
HM Revenue & Customs
       
    Sep Wages & Salaries 243
       
       
       
Employer's NI
       
       
       
       
       

 

Step 3

September: The £102 employer's NI must be accured.

Debit: Employer's NI (expense)

Credit:HM Revenue & Customs (liability)

At this point we have recorded a total expense of £1,102 and total liability of £345.

Bank
       
    Sep Wages & Salaries 757
       
       
       
Wages & Salaries
       
Sep Bank 757    
Sep HMRC 243    
       
       
HM Revenue & Customs
       
    Sep Wages & Salaries 243
    Sep  
    Employer's NI 102
       
Employer's NI
       
Sep HMRC 102    
       
       
       

 

Step 4

During October we pay £345 to HM Revenue & Customs.

Debit: HM Revenue & Customs (liability)

Credit: Bank (assets)

We have now cleared our liability account and paid out in total £1,102 (£757 + £345).

This completes our entries relating to the September salary. You will know be asked some questions relating to October.

Bank
       
    Sep Wages & Salaries 757
    Oct HMRC 345
       
       
Wages & Salaries
       
Sep Bank 757    
Sep HMRC 243    
       
       
HM Revenue & Customs
       
Oct Bank 345 Sep Wages & Salaries 243
    Sep Employer's NI 102
       
       
Employer's NI
       
Sep HMRC 102