We have a company which is doing a salary calculation for us and based on their calculation we are paying salaries to the employees. We also pay social contributions for employees directly to this company. So the question is how to book costs for the salaries, should we first book it as liability and then when we are making a payment should we book it as costs? Or should we directly book it as costs?
The same question goes for paying contributions on the salary, since we are paying it directly to the company which is doing salary calculation, should it directly go into costs or first to liabilities?
Thank you Joe, There is no delay between the payment and expenses. So what would you suggest? Book it directly through payment/expenses or? I am not sure how this affects the balance sheet and Profit and loss statement.
If there is no need to keep information on the individual employees, I suggest that the simpler the better
Setup whatever expense accounts you need eg Wages or Wages, Taxes, … This will depend on how detailed you want your expenses shown. It may be that a single expense account called Wages & Salaries is sufficient. Without knowing your need for further analysis I can’t say anymore than that.
Then post a payment for the total amount split into the expense accounts you have created.
The only effect on the balance sheet will be in the reduction of the bank balance