Nominal Ledger Notes - Setting up a Template to enter your ...



Nominal Ledger Notes - Setting up a Template to enter your Payroll

If you are not currently using the Oasis payroll you will need to enter your payroll payments via the Cash Book, and analyse the cost to the school by entering journals directly into the Nominal Ledger. Although you may be entering the payments to the staff as Cash Book payments and coding these to your salaries account, you should really be setting up a proper journal which will allow you to analyse the true cost to the school, where necessary, down to department level. This journal will show the gross pay, the deductions coming out of that pay, and additional employers costs such as Employers NI and pension contributions.

In most cases the amounts will differ each week or month, but the basic entries will be the same – gross pay, tax, NI, Net pay etc. Since you will be entering the same set of journals each week or month, it will save a lot of time if you set up a journal template. Then, each month you simply load the template, run through the entries and amend the amounts, then make the posting. These notes are designed to help you set up a journal template for your payroll postings.

1. What postings would normally be made from the payroll.

We will start with a very simple example and look at what postings are made. A payroll run contains the following:-

Basic Pay Teachers 2000

Basic Pay Cleaners 500

Overtime Teachers 100

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2600 Total gross pay

Tax 640-

NI employee 280-

Pension employee 50-

Court Order Ded’n 20-

------

Net Pay 1610

Employers NI 310 Additional Employer costs

Employers Pension 100

So, our payroll consists of a number of costs to the school – Gross pay, employers NI and Pension – and a number of deductions from the employees pay, all of which will be paid over to someone else – the employee, the Inland Revenue etc. The expenses will all be coded to Expense accounts in our Profit & Loss report. This will allow us to do proper budget comparisons. The deductions will be coded to ‘control’ accounts in the Balance Sheet from which the money will then be paid to the employees, the Inland revenue etc. This gives us an additional check on the figures paid over, as if everything is correct these accounts will then be zero.

2. How would these entries normally be coded

When setting up the entries into the Nominal Ledger the simple payroll example above would normally be coded as follows:-

| |Debits |Credits | |

|Teachers Basic Pay |2000 | |Teachers Salaries (Expense a/c) |

|Cleaners Basic Pay | 500 | |Cleaners Salaries “ “ |

|Overtime teachers | 100 | |Teachers Salaries “ “ |

| | | | |

|Tax | | 640 |PAYE Control Account (Balance sheet) |

|NI ee | | 280 |PAYE Control Account (Balance Sheet) |

|Employee Pension | |50 |Pension Control Account (Balance Sheet) |

|Court Order Ded’n | | 20 |Courts Control Account (Balance Sheet) |

| | | | |

|Net Pay | |1610 |Payroll Control A/c (Balance Sheet) |

| | | | |

|Employers NI Ctl | | 310 |PAYE Control Account (Balance sheet) |

|Employers Pension Ctl | |100 |Pension Control Account (Balance Sheet) |

|Employers NI Teachers | 260 | |Teachers Salaries (Expense a/c) NI cost |

|Employers NI Cleaners |50 | |Cleaners Salaries (Expense a/c) NI cost |

|Teachers Pension Ers |100 | |Teachers Salaries (Exp a/c) pension cost |

| | | | |

| |3010 |3010 | |

Looking at this table you can see that we have two main types of entry:-

1. Entries to the expense accounts – this is what it costs us to employ our staff. This includes the gross pay, other payments such as overtime and also the employers contributions to NI and pensions.

Entries to ‘control accounts’. This is money which will be paid out - to the employees as Net pay, to the Inland Revenue or Pension provider, or to the Courts. Control accounts are balance sheet accounts and should always total zero once the actual payments are made. You can, if you prefer, use separate NI and PAYE control accounts, or you can code all these entries to the same account, since it will be paid with a single cheque or debit.

|Note – Dealing with employer items |

|You will see from the table above that the Employers Pension and NI contributions have been entered twice, once as a debit and once as a |

|credit. This is because these items are a cost (debit) to the school, but must also be put into the control account (as a credit) to be paid |

|to the Inland Revenue or Pensions Agency. Because we operate full double entry all employer items must be set up in this way. |

3. Setting up the Nominal Ledger Journal Template

Once you have decided where all the entries for your payroll should go you can set up a template. This is a special batch which will be loaded each time you wish to post your payroll. The date and the comments can be changed each time you use the template to show the correct month.

Go into Nominal Ledger Journals and use the Templates option to set up a template batch. On the Batch header screen enter a comment such as ‘Salaries Template’ which will help you find this template in future. Set up the entries for your first month, but do not put the month name in the comments for each entry. This will be inserted each time the template is used, as well as the new date for each month. The template for the payroll above would look like this:

Once this is all entered simply save the batch as a template.

4. Using the Template each month

Once you have set up the template you may now use it each month to make your entries. Go into the Normal Journals program and use the button to Read Template. Select the Salaries template from the drop down list of templates.

Enter the new processing date and the text which will be added to the comments already in the template. Once you have confirmed that you do wish to load the template you can view the batch and alter the amounts where necessary. The batch will now look like this.

Select the first line and the amount will be displayed at the bottom for you to amend and Update if necessary. The program will then automatically present you with each line in turn for you to amend. If you have to make any additional entries, for example if the Cleaners are due Backpay, you would use the normal ‘Enter items’ to add these entries to the batch. Once you are happy with the batch, simply close it. This will make all the necessary postings, leaving your template unchanged for use next month.

5. Dealing with the payments to be made

The Journal template only deals with the costs to the school. Payments to staff, the Inland Revenue and the Pensions agency etc are all made through the Cash Book. When you enter the payments remember to code them to the appropriate control account. So if your employees are paid by BACS you would pick the direct debit up from your Bank Statement and enter it as a payment against the Payroll Control account, bringing this back to zero. At the start of the next month when the Tax & NI is paid the payment will be made against the PAYE Control account, leaving it at zero and the Court Order will be paid from the Courts Control account.

Once you have made all your payments the control accounts should all be zero. Any discrepancies between what you have entered and what was actually paid will immediately be obvious, allowing you to sort them out now and not wait till the end of the year when the auditors come in. You can also see immediately the true cost to the school of employing your staff. In our example above the cost to the school is £2460 for teachers and £550 for cleaners, including not just their gross pay, but also the employers contribution to NI and Pensions.

6. And finally….

Remember that Nominal Ledger Journal Templates may be used for many things other than entering your payroll. If you would like to know more about journal templates, or would like a short training course on setting up and using Templates in the Nominal Ledger and importing recurring payments and receipts in the Cash book please contact Beaver Software.

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