What else is withheld from wages besides personal income tax, and which journal entry records each deduction?

After wages are accrued, the amount the employee takes home is often much smaller. The reason is not only tax. The employer withholds personal income tax as a tax agent, but in the same month there may also be deductions for the advance, debts and court documents. Each has its own credit account, while the debit is always the same: 6710.

Key points

1. Every deduction passes through the debit of 6710. Under paragraph 287 of NAS No. 21, wages are accrued on the credit of 6710, while the debit shows their payment and the deductions from them. So at month-end the balance of 6710 shows the net amount still to be paid to the employee.
2. Personal income tax: Dt 6710 – Ct 6410 (paragraph 275, line 4). This is the employee's money: the company does not record it as its own expense, it only withholds it and transfers it to the budget (transfer: Dt 6410 – Ct 5010-5530, paragraph 275, line 7). Analytical accounting on 6410 is kept separately for each type of tax (paragraph 274).
3. Contribution to state trust funds at the employee's expense: Dt 6710 – Ct 6520 (paragraph 280, line 4). Which contribution is made at the employee's expense and its amount are set by legislation; the table only shows the direction of the entry.
4. Advance paid in the middle of the month: Dt 6710 – Ct 4210 (paragraph 185, line 2). When the advance was paid, Dt 4210 – Ct 5010 was recorded (paragraph 185, line 1); at month-end it is closed.
5. Unreturned accountable amount: Dt 6710 – Ct 4220-4290 (paragraph 290, line 13). For example, if the balance of trip money was not returned to the cash desk.
6. The employee's other debts to the company. Next instalment for goods bought on credit: Dt 6710 – Ct 4710 (paragraph 290, line 15). Material damage caused by a guilty employee: Dt 6710 – Ct 4730 (line 16). Value of products, work or services sold to the employee: Dt 6710 – Ct 4790 (line 11).
7. Deductions under court enforcement documents are accumulated on 6990. Under paragraph 307, the liability for amounts withheld from wages in favour of third parties on the basis of enforcement documents or court decisions sits on account 6990 "Other liabilities". Payment to the claimant from the cash desk: Dt 6990 – Ct 5010, 5020 (paragraph 223, line 17).
8. The basis and limit of a deduction lie outside accounting. Which deductions require the employee's consent, their order of priority and the overall limit are set by labour legislation. The accountant makes the journal entry only when there is a lawful basis (application, order, enforcement document).

Example

At "Chinor Mebel" LLC, workshop foreman Bekzod was accrued wages of 8 000 000 soum for October. The personal income tax amount calculated is taken as 870 000 soum (a hypothetical amount, not calculated from a rate; the real calculation is made under the current version of the Tax Code). The grounds for the other deductions are documented, the amounts are hypothetical.

In addition, 1 000 000 soum was withheld under a court enforcement document. As a deduction it passes through the debit of 6710 (paragraph 287), while the liability to the claimant sits on 6990 (paragraph 307). The NAS No. 21 tables have no separate line for this link, so set the recording procedure in your accounting policy. Payment to the claimant from the cash desk, however, is in the table: Dt 6990 – Ct 5010 (paragraph 223, line 17).

Let us check the calculation:

8 000 000 − 870 000 − 2 000 000 − 150 000 − 300 000 − 1 000 000 = 3 680 000. After payment, the balance for Bekzod on 6710 must be zero. If it is not zero, some deduction was not recorded or was recorded twice.