Hi, salary only able made payment by bank and cash account?? how about if the payment is paid by capital account?? under paid from only have cash and bank account. Please advice.
Question, when you capitalised your organisation on the credit side of the journal entry , what account did you debit?
A payment can only occur from a cash or bank account. That is where the money is. The capital account gets the balancing debit. It is not an actual source of funds.
Your transaction for example if you capitalised your organisation with $10,000 would be to credit your capital account with $10,000 and debit your cash & cash equivalents account $10,000 (this could be paid into you bank account or put in your office draw, as cash on hand) / Then when you pay the salary from the cash, you would credit the cash & cash equivalent account (take the money out of the draw), then put the money in your coat pocket (this is your salary) and on the expenditure account, debit salaries
Wages and salaries are handled in two stages in Manager
First you create a payslip which establishes the liabilty to the employee and other third parties eg tax, social insurance and the expense in the P&L
Then you make payments to the employee and third parties from a cash or bank account
If no payment is made, then you can use a journal entry to debit the employee liability and credit the capital account.
What if you are not making a payment to an employee, but you are making a payment as directors salary. this could be a straight forward payment that does not incur statutory obligations?
A Director is also an employee.
Could be if there is a service agreement in place, however could also be engaged under a directorship office and therefore not an employee.
I was actually trying to help Liau Lee chin with his recording issue for a transaction. From his opening comment he was requesting some advice, so thinking about what could be the possible reason for payment from a capital account, i thought back to my own time of inexperience in accounting. Maybe his organisation has not yet made any sales, so in his mind he has not earned any money to pay a salary. So he might be thinking that he can simply take the money from the capital that he contributed. It would seem in some way logical to the inexperienced, but not correct according to principals.
There is good information in the guides about owners drawing from the capital accounts such as Simplify equity accounting for sole traders / proprietors | Manager and Use capital subaccounts | Manager and Set up and use capital accounts | Manager
Nice, will make a study. Thanks!