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As a general rule, two Journal Entries will suffice. The first - a reference to the net payment to employees (the figures are "extracted" directly from the payroll). The second - to take into consideration the existing employer's payments (the figures are "extracted" from relevant Income Tax and Social Security forms.

The Journal Entry is as follows:

    $ $
1. Debit: Nathan 833   
  Debit: Warren 1,290  
  Debit: Bjorn 1,330  
      Credit Bank current account   3,278
  8.9.xx - Net Salary Payments 3,278
2. Debit: Salary expenses 4,180  
  Debit: Employers' tax expense 152  
  Debit: Social security expenses 412  
  Credit: Nathan   855
  Credit: Warren   1,290
  Credit: Bjorn   1,133
  Credit: Income tax deductions   850
  Credit: Social Security deductions _________ 616
  15.9.xx - Salaries Entry 8/xx 4,744
3. Debit: Income tax deductions 850  
  Debit: Social Security deductions 616  
  Credit: Bank current account ________ 1,466
  15.9.xx - Payment of deductions, Salaries 1,466

The Explanations for Journal Entry No. 2

a. Salary expenses - $ 4,180
The sum has been extracted from the payroll (the gross taxable total).

b. Employers' tax expenses - $ 152
The sum has been taken directly from the relevant tax forms.

c. Social Security expenses
This is the only amount in the Journal Entry that is not extracted from another source. This amount is arrived at using the following formula:

Total due to Social Security (according to the
relevant Social Security forms
Less: Social Security deductions from employees
(from the payroll data)
The difference is the employer's contribution
for Social Security

Comment: The three debit accounts above are normal expenses accounts. Their final destination is, of course, in the Profit and Loss Statement.

d. Employees' Accounts (Nathan, Warren and Bjorn)
These are normal personal accounts that are in credit at this stage, as the employees are eligible to be credited by the employer with their net salary.

e. Income Tax/Social Security Deductions
There are normal personal accounts in respect of the Salaries for August xx. Both the institutions (Income Tax and Social Security) are entitled to be credited by the employer with the amounts that appear in their relevant forms.

Nominal Ledger Records

The T accounts for the three above journal entries will look like this:

Nathan   A/c
   Debit Credit   
(1)  855  
  855 (2)
Warren  A/c
   Debit Credit   
(1)  1,290  
  1,290  (2)
Bjorn  A/c
   Debit Credit   
(1)  1,133  
  1,133  (2)
Current A/c  at Bank A/c
   Debit Credit   
3,278  (2)
1,466  (3)
Salaries Ex penses A/c
   Debit Credit   
(2)  4,180  
Employers Tax  Expenses A/c
   Debit Credit   
(2)  152  
Social S.  Expenses A/c
   Debit Credit   
(2)  412  
Income Tax  Deductions A/c
   Debit Credit   
(3)  850  
  850  (2)
Social Security  Deductions A/c
   Debit Credit   
(3)  616  
  616  (2)

The Development of Bookkeeping The debit & credit rules Journal Entries Nominal Ledger Trial Balance Annual Statements (Profit & Loss/Balance Sheet) The Balance Sheet
Bank Reconciliation Salaries Tax Deduction at Source Value added tax

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