How to correctly record pre-tax and post-tax deductions in the payroll journal
A finance professional sought help because pre-tax and post-tax deductions in the employee payroll journal did not balance. Based on the specific data provided, this article clarifies the journal entry logic for pre-tax deductions, post-tax deductions, and net pay, and points out possible differences in measurement basis.
Hello,
I would like your guidance on an imbalance issue that arises when recording pre-tax deductions and post-tax deductions in the wage journal. The specific situation is as follows:
- The journal was initially unbalanced due to the pre-tax deduction amount—I have recorded it as a credit. Is this correct?
- The journal is now balanced, but I am still unclear on how to record a post-tax deduction (i.e., a loan deduction) of 853.63.
- If I record this 853.63 as a credit, which account should the corresponding debit be posted to? Otherwise, the journal will become unbalanced again due to this loan amount.
The employee's gross pay is 1268.33, taxable gross is 414.7, pre-tax payment is 0, PAYE is -125.6 (negative), SSP is 414.70, post-tax payment is 856.63, and net pay is 1377.34.
My current entries are: net pay credited to the 'Net Pay Control' account, and gross pay debited to the P&L account. Is this logic reasonable?
Thank you in advance for your help!