Annual Air Fare Allowance in Payslip

[siyab]

Hi,

Our company gives out a certain amount (ex. AED 2000) each year to employees who complete a year of employment. From the beginning of the year we pass a provision entry debiting Air Fare A/c (P&L) and crediting Provision - Air Fare A/c (BS - Liabilities).

Now, an employee has completed a year and I want to pay out this AED 2000 to that employee. I want to add this as part of his payslip. But “Payslip Earnings Item” does not list the balance sheet accounts (Provision - Air Fare A/c (BS - Liabilities)). Am I doing something wrong here?

If I were to pay this AED 2000 separately to the employee, I would have made a payment entry to the Provision - Air Fare A/c (BS - Liabilities), right?

[Joe91]

It is not an earnings item as earnings items affect P&L Expense accounts and you have already debit the Expense when you made the provision

You could treat it as negative Deduction item

Or you could reverse the original provision and then charge it to the P & L Expense account using an Earnings item

Set up payslip items | Manager

[siyab]

@Joe91

You could treat it as negative Deduction item

Could you explain how this can be done? Will I get the desired result?

[Joe91]

You need to setup a test business and enter the few accounts you need or import your current business as a new test business

Then enter the Payslip Deduction item as a negative amount to see if that meets your needs

[tony]

The liability for the Air Fare payslip earnings item will be allocated to the Employee Clearing Account. The payment to the employee must be allocated to the Employee Clearing Account.

[AJD]

You need an additional P & L account - Provision for employee Airfare benefit (P & L expense)
When creating the provision you use this account instead of - Employee Airfare benefit (P & L expense)
On creation of payslip item select - Employee Airfare benefit (P & L )

Once the employee has been paid the Airfare benefit, do a journal to reverse the provision.

[cletus18]

Based on what I understand you’re trying to do, you may try these steps.
Setup your chart of account by creating your expenses

Setup payslip items - earnings and reference expenses account (provision)

Enter payslip

P&L takes the expenses (salary/provision) while Balance Sheet takes the liability (employee clearing account)

Balance sheet before payslip is actually paid

I hope you can find this useful and please if you have a better way to solve it kindly share here

[tony]

@cletus18 your solution is very good but I would only change the name of the expense account to something like Air Fare Allowances. A provision is typically a liability account.