What journal entries are made when payroll is calculated?

Q: In which account is payroll recorded?

Settlements with employees for wages are kept in account 6710 "Payroll settlements with employees". It is a liability account: a credit increases the company's debt to its employees, a debit decreases it. The debit side depends on where the employee works. The salary becomes an expense of that department. The NAS No. 21 table splits it the same way: wages accrued to primary production workers are Dt 2010 Ct 6710, while wages of staff engaged in servicing production are Dt 2510 Ct 6710.

Q: What happens when tax is withheld?

Personal income tax (JShDS) is withheld from the salary. Here the employer acts as a tax agent: it pays the tax to the budget on the employee's behalf. In the example, let the tax withheld be 600 000 soums. This amount is illustrative; check the current rate in the Tax Code. The remaining debt to the employee is now: 5 000 000 − 600 000 = 4 400 000 soums.

Q: What about social tax?

Social tax is not withheld from the employee's salary; the employer pays it out of its own funds. That is why it is also an expense and is debited to the same department account as in the table above. The credit side is account 6520 "Payments to state trust funds". The NAS No. 21 table for account 6500 says exactly this: debit the expense accounts, credit 6520. Remember: personal income tax is withheld from the employee's money, while social tax is paid out of the company's pocket.

It is the end of the month. Nodira, the accountant of the "Gulzor" cafe, opens the payroll sheet. Waiter, cook, administrator: each has a salary, tax is withheld from it, and then the money goes to their bank card. All of this is reflected in the books with a few short records, that is, journal entries.

Let us walk through this path step by step.

In which account is payroll recorded?

Settlements with employees for wages are kept in account 6710 "Payroll settlements with employees". It is a liability account: a credit increases the company's debt to its employees, a debit decreases it.

The debit side depends on where the employee works. The salary becomes an expense of that department.

Where the employee works	Debit
In primary production (cook, craftsman)	2010 Primary production
In production support	2510 General production overheads
In the sales department (salesperson, waiter)	9410 Selling expenses
In management (director, accountant)	9420 Administrative expenses

The NAS No. 21 table splits it the same way: wages accrued to primary production workers are Dt 2010 Ct 6710, while wages of staff engaged in servicing production are Dt 2510 Ct 6710.

What journal entry is made when the salary is calculated?

Suppose the administrator is credited with a monthly salary of 5 000 000 soums (illustrative amount).

Transaction	Debit	Credit	Amount
Salary accrued	9420	6710	5 000 000

Now the company owes the employee 5 000 000 soums.

What happens when tax is withheld?

Personal income tax (JShDS) is withheld from the salary. Here the employer acts as a tax agent: it pays the tax to the budget on the employee's behalf.

In the example, let the tax withheld be 600 000 soums. This amount is illustrative; check the current rate in the Tax Code.

Transaction	Debit	Credit	Amount
Personal income tax withheld	6710	6410	600 000

The remaining debt to the employee is now: 5 000 000 − 600 000 = 4 400 000 soums.

How is the salary paid?

If the money is transferred to a card through the bank, it leaves the settlement account. If it is paid in cash, it leaves the till.

Transaction	Debit	Credit	Amount
Salary transferred to the card	6710	5110	4 400 000
Withheld personal income tax paid to the budget	6410	5110	600 000

With this, the balance of account 6710 drops to zero: the company has fully settled its debt to the employee.

Social tax is not withheld from the employee's salary; the employer pays it out of its own funds. That is why it is also an expense and is debited to the same department account as in the table above. The credit side is account 6520 "Payments to state trust funds". The NAS No. 21 table for account 6500 says exactly this: debit the expense accounts, credit 6520.

Transaction	Debit	Credit
Social tax accrued on the administrator's salary	9420	6520
Social tax paid from the bank account	6520	5110

In brief

Salary accrued: Dt 2010/2510/9410/9420 – Ct 6710
Personal income tax withheld: Dt 6710 – Ct 6410
Salary paid: Dt 6710 – Ct 5110 (or 5010)
Tax transferred to the budget: Dt 6410 – Ct 5110
Social tax accrued: Dt 2010/2510/9410/9420 – Ct 6520
Social tax paid: Dt 6520 – Ct 5110

Test yourself

5 questions on this topic: pick an option or reveal the answer.

"Arnasoy baliq" LLC, which works seasonally, accrued wages in winter to workers who did preparatory work for the next season. Under its accounting policy this cost is included in deferred expenses. Which journal entry is made?

In the weaving shop of "Shahrixon to'qimachi", the wages of the technicians who set up the looms and service production are recorded as general production overhead. The single social payment was accrued on these wages at the company's expense. What journal entry is made?

Salaries were accrued to administrative staff. What journal entry is made?

Kosonsoy Tikuv LLC charged to expenses the contributions to state trust funds on the wages of primary production workers. Which journal entry is made under paragraph 120 of NAS No. 21?

Because of an error by the accountant of "Paxtachi mebel" LLC, a carpenter was overpaid 650,000 soums of wages. The carpenter paid this amount back into the cash desk. Which journal entry is made?

Answered: 0 / 50 of 5 correct

All tests →

What journal entries are made when payroll is calculated?

In which account is payroll recorded?

What journal entry is made when the salary is calculated?

What happens when tax is withheld?

How is the salary paid?

In brief

Test yourself

See also

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