Hello.
I have a query for employee withholding tax
when i made a salary for employee exmple:
salary = 100
Debit = 90
Withhoslingtx debit = 10
Total credit = 100
Why withholding tax is showing in credit?
But the withholding ledger is Cr with 10…?? why
The salary is the cost to your business and will debit to an expense account
The tax is the tax you withhold and will appear in a Payroll Liability account eg Tax due, tax withheld as a credit - it is money the business owes someone
The balance goes to the employee’s clearing account as a credit - it also is money the business owes someone
When you pay the employee you will pay it from a bank or cash account and that will clear the Employee Clearing account
When you pay the taxes over to the tax authority, that will clear the tax due/tax withheld account
This is more clearly explained in the Payroll Guides
Thank for your reply
But when i Purchase something and made a purchase invoice
Total Amount is 100
Goods is Dr = 100
party name is Cr = 90
withholding tax Cr= 10
but the withholding tax is showing is Dr in withholding tax ledger.
Why…???
Azeem Kamran
@Azeem_kamran, you initially asked about employee withholding tax. Now you are asking about withholding tax on purchases. The two have absolutely nothing to do with one another.
The first is a type of payslip deduction item. The second is money you withhold on purchases on submit to the tax authority on behalf of your supplier. For that, read this Guide: Account for withholding tax on sales invoices | Manager.