Study Surgery

Q. I have done a Unit 2 practice simulation. I found that in the wages and salaries control account the credit side shows the gross pay (total cost to business) without including the employers NIC contribution. This has also been listed on the debit side of the wages expense account.

According to my tutor, the total cost (net pay+paye+employers+employees NICs) is one entry (CR) on the control account and one entry (DR) on the expense account. We list separately on the DR side of the control account for net pay, PAYE, employee's NIC and employers NIC. Which is correct?

A. Both are! One quite often posts the wages account separately for each constituent part of the wages bill- namely:

• the gross pay of the employee
• the employers NI contribution
• the employers contribution to the employee’s pension

The sum of these will be the gross payroll cost to the employer. Your tutor has combined all of these costs into one journal, which is fine.

The Simulation you refer to looks like it is posting each element one at a time, which is also fine.

In accounting, there is often more than one way to achieve the same aim. This provides choice, but is extremely confusing to students!! On balance, I prefer to post each element separately as it takes the process step by step.

Simon Deane BA ACA is Managing Director of a private training provider