Time Tracking and Job Cost Modules

[TomTarget]

Anyone else notice that when doing accrual accounting that you can get wages, taxes and vacation/sick benefits to accrue, but not employer contributions (medical, pension, etc.)?

Deduction postings do not accrue either but simply remain in wages payable.  Since employer contributions are set up as deductions, I'm assuming that they are just following the pattern for all the other deductions. 

Or am I just missing something?

[mjpolk]

Tom,

I'm not quite understanding your question. 

Employer contributions debit the appropriate expense account and credit the appropriate Payables account when payroll is posted and then when paying the appropriate authority for the contribution, Payables is debited and the Cash account is credited.  Ex. FICA Expense is debited and FICA Payables is credited and then when you make your FICA deposits, Payables is Debited and your Cash Account is Credited. 

In fact most of the time Vacation/sick leave is modified accrual. An employee works 1 month and gets 4 hrs leave. Then when the employee takes off, the Vacation leave is reduced and the Payroll expense is incurred.  In true accrual the vacation leave expense should be incurred when the employee earns the leave not when he/she uses it.

Unless you are refering to YTD, QTD, and MTD totals. In which case, the only item I have found that doesn't do a YTD, QTD, or MTD is Workers Comp which I have to recalculate for one of my customers which has a Personnel Management Company which has a 4% markup when Billing the other companies.

If I'm missing what your asking could you please explain a bit more in detail

[TomTarget]

Taxes and vacation/sick accruals are not the issue.  They work just fine.

Example:

Earnings Code #1    $1,000

Employer Contribution for Medical Insurance   $250   (this is set up as an employer contribution under deductions).

Assume that FICA/Medicare w/h is $75

No FIT w/h 

If you don't do accrual posting you get:

Cash                                          $925

Medical Payable                          $250

FICA Payable                                150

Wage Expense           $1,000

Medical Exp                    250

FICA Expense                   75

If doing ACCRUAL (100%) posting you get

(accrual entry) 

Wages Payable                         $925

FICA Payable                              150

Wage Expense          $925

FICA Expense             150 

 (issue check)

Cash                                        $925

Wages  Payable         $925

Medical Exp                 250

Medical Payable                        $250 

Since the employer contribution for medical relates to the period being accrued, would expect it to be in the accrual entry.

Note that all other item set up under deduction (not taxes) maintenance, seem to hit in the second entry.  That's OK as it really rolls up under wages payable anyway,  but it doesn't make sense for an employer contribution.

Message Edited by TomTarget on 01-30-2010 08:29 AM

[mjpolk]

While it accomplishes relatively the same thing and I could only project reasoning.  My questions is "Why are you at work at 4:20 on a Friday Afternoon contemplating a trival item?"  I hope you at least had a beer, glass of wine, or shot of tequilla while wondering why.

[bbalser]

Tom,

Your original assumption is correct.  As a deduction, the employer contribution is treated like other deductions. 

[TomTarget]

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mjpolk wrote:

While it accomplishes relatively the same thing and I could only project reasoning.  My questions is "Why are you at work at 4:20 on a Friday Afternoon contemplating a trival item?"  I hope you at least had a beer, glass of wine, or shot of tequilla while wondering why.

---

I'm a CPA.  It's tax season.  My Friday is on Saturday.

As a CPA/accountant/auditor, getting the deductions in the correct period is important.  Would just be nice not to have to make a journal entry to get it correct (btw, it's a large payroll with a lot of departments, so doing the journal entry is kind of a pain).

[photo7589]

Tom

I understand your reasoning, but I believe it has something to do with when the employer is legally liable for those contributions and in your example, I would assume they aren't liable until the $'s have been given to the employee or given as the employer contribution and employer can't take the deduction early. 

I always thought you couldn't accrue the fica payable/fica expense, etc as the employer wasn't liable for that until the $'s were actually withheld from the employee which create the expense/liability for the employer.  However they are liable for the wages thru the end of the previous month, thus the accrual.

Nancy

[TomTarget]

Your analysis would be accurate in a cash basis of accounting, but not accrual accounting. 

The amount may not yet be due however the expense is associated with the time that the employee's service was provided so it should be recorded in the month the service was provided.  The employee is legally entitled to the benefit, because he did the work required to earn it.

 For example, assume that a company was in business for two months.  Employees only worked in the first month.  No work in the second month.

Accrual accounting should show this:

                       Month 1            Month 2 

 Wages            $1,000                    0

Taxes                   100                    0

Benefits                  80                    0

Cash accounting would show this:

Accrual accounting should show this:

                       Month 1            Month 2 

 Wages            $1,000                    0

Taxes                       0               100     (the 100 is the employer's expense, not the amount withheld)

Benefits                    0                 80     (assuming the premium is not paid until month 2)

[lisaniel]

Thanx for sharing

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