How to Record Salary Payment Transactions in English Accounting Entries?

When processing salary payment transactions in English accounting systems, the core principle revolves around dual recognition of accrued liabilities and actual payments. The workflow typically involves three phases: payroll accrual, salary disbursement, and settlement of withholdings, each requiring precise alignment with double-entry bookkeeping rules. Below, we break down the process using standardized English accounting terminology.

1. Accrual Phase: Recognizing Payroll Liabilities

At month-end, companies record accrued salaries based on employees’ earned but unpaid wages. This step adheres to the matching principle in accounting:

• 借（Debit）: Relevant expense accounts (e.g., Production Costs, Administrative Expenses, or Sales Expenses)
• 贷（Credit）: Salaries Payable (or Accrued Payroll)
  For example, allocating $693,000 in total salaries across departments would involve debiting Work in Process ($480,000), Manufacturing Overhead ($105,000), General & Administrative Expenses ($90,600), and Sales Expenses ($17,400), while crediting Salaries Payable.

Employers also accrue employer-paid social contributions (e.g., pensions, insurance):

• 借（Debit）: Same expense accounts as salary allocation
• 贷（Credit）: Social Security Payable or Benefits Payable.

2. Salary Disbursement: Executing Payments

When salaries are paid, the Salaries Payable account is reduced, and cash/bank accounts are credited. Key withholdings (e.g., taxes, employee social contributions) are recorded as liabilities:

• 借（Debit）: Salaries Payable
• 贷（Credit）:
  • Cash at Bank (net amount paid to employees)
  • Withholding Tax Payable (for income taxes)
  • Other Payables - Employee Social Contributions (e.g., pension/insurance deductions).

For instance, paying $653,000 net salary after deducting $40,000 in withholdings would involve crediting Cash at Bank ($653,000), Withholding Tax Payable (e.g., $8,000), and Other Payables - Social Security ($32,000).

3. Settling Withholdings and Employer Contributions

The final phase resolves third-party obligations:

• Social security and benefits: Both employee withholdings and employer contributions are paid to authorities:
  • 借（Debit）:
    • Other Payables - Employee Social Contributions (employee portion)
    • Social Security Payable (employer portion)
  • 贷（Credit）: Cash at Bank.
• Income tax remittance:
  • 借（Debit）: Withholding Tax Payable
  • 贷（Credit）: Cash at Bank.

4. Adjustments for Accrual-Payment Discrepancies

If accrued amounts differ from actual payments, adjustments are made:

• Over-accrual: Reverse excess accruals with a red-ink entry:
  • 借（Debit）: Expense accounts (negative value)
  • 贷（Credit）: Salaries Payable (negative value).
• Under-accrual: Post an additional accrual entry to align with actual payments.

5. Special Cases: Bonuses, Benefits, and Termination Payments

• Bonuses and allowances: Tracked under sub-accounts like Salaries Payable - Bonuses and expensed similarly to base salaries.
• Termination benefits: Recognized immediately in General & Administrative Expenses (not allocated to departments) and credited to Severance Payable.
• Training costs: Employee Education Fund expenses allow input tax credits, unlike most staff benefits.

By systematically applying these steps, businesses ensure compliance with IAS 19 (Employee Benefits) and maintain accurate financial statements. Always verify localized terminology for social security items and tax codes, as these may vary by jurisdiction.