What account 6710 is for
An employee works throughout the month but receives the pay later. In between, the organisation owes the employee. This debt (how much was accrued, how much was withheld, how much was handed over) is tracked in 6710.
Paragraph 286 of the Instructions lists what this debt covers: all types of wages, bonuses, benefits, pensions accrued to working pensioners and other payments. Group 6700 has two sub-accounts:
| Sub-account | What is recorded |
|---|---|
| 6710 "Payroll settlements with employees" | Amounts accrued, withheld and paid |
| 6720 "Deposited (unclaimed) wages" | Debt for wages not collected by employees (para. 289) |
A liability account: what that means
In the chart of accounts, 6700 has type "P" (liability). Under paragraph 3 of NAS No. 21, in a liability account the balance and increases of an obligation are recorded on the credit side and decreases on the debit side. Applied to employees:
- wages are accrued: the organisation's debt grows, 6710 is credited;
- wages are paid or an amount is withheld from them: the debt falls, 6710 is debited;
- the credit balance at the end of the month shows the amount not yet paid to employees.
What goes to the credit side
Under paragraph 287, the credit side shows accrued pay, social insurance benefits, pensions and other amounts of this kind. The debit account on the other side depends on what work the employee's labour went into. All cases in the table in paragraph 290 in which 6710 is credited:
| Case | Debit |
|---|---|
| Work in capital investments | 0810-0890 |
| Procurement and purchase of inventories | 1010-1120, 2910-2990 (where 1510 is used, 1510) |
| Primary, auxiliary and general production, rectifying defective products, service facilities | 2010, 2310, 2510, 2610, 2710 |
| Sale of products, administration and other operations | 9410-9430 |
| Work included in deferred expenses (seasonal industries) | 3190 |
| Work on disposal of fixed assets | 9210 |
| Return of an overpaid amount to the cash desk | 5010 |
| Dealing with the consequences of natural disasters and fires | 9720 |
| One-off bonus | 9430 |
In other words, the wage cost is charged to whatever activity the employee worked in. Only row 8 (an overpaid amount returned to the cash desk) is not an expense: it is money overpaid to an employee coming back.
What goes to the debit side
Under the same paragraph, the debit side shows the payment of accrued wages and the deductions made from them. In the table in paragraph 290 there is one payment, issue from the cash desk (Cr 5010), and five deductions:
- money not returned by an accountable person (4220-4290);
- the value of products, work and services sold to the employee (4790);
- the next instalment for goods bought on credit (4710);
- material damage caused (4730);
- the obligation under a subscription for shares (4610).
The tables of other accounts also have rows in which 6710 is debited:
- withholding the advance paid in the middle of the month: Cr 4210 (para. 185, row 2);
- withholding a founder's contribution to the charter capital from their wages: Cr 4610 (para. 198, row 7);
- a deduction for goods bought on credit: Cr 4710 (para. 206, row 4; the same as para. 290, row 15);
- paying wages and bonuses from the cash desk: Cr 5010, 5020 (para. 223, row 14);
- withholding income tax from wages: Cr 6410 (para. 275, row 4);
- contributions to state trust funds at the employee's expense: Cr 6520 (para. 280, row 4).
Points to watch
- Each employee separately. Under paragraph 289, analytical accounting for 6710 and 6720 is kept separately for each employee. Even if the total balance is correct, it must be visible how much is owed to whom.
- The advance is closed at month end. Under paragraph 181, monthly advances are transferred at the end of the month from the credit of 4210 to the debit of 6710. Otherwise an advance is left "hanging" in 4210 and 6710 shows an excess debt.
- Leave spanning two months. Under paragraph 288, money paid for leave days falling in the next month is recorded in the current month like an advance, on the debit of 4290 and the credit of 5010.
- Uncollected pay. Wages not collected by an employee are accounted for in 6720 "Deposited (unclaimed) wages" (para. 289).
- At the end of the month, compare the credit balance of 6710 with the unpaid amounts by employee in the payroll sheet: they must be equal (practical tip).
Main journal entries 12
Debit and credit are as in the model table of Appendix 2 to NAS No. 21. The transaction text briefly restates the table row.
| Transaction | Debit | Credit | Source |
|---|---|---|---|
| Wages accrued to workers of production workshops and service facilities | 2010, 2310, 2510, 2610, 2710 | 6710 | NAS No. 21, para. 290, row 4 |
| Wages accrued to employees engaged in sales, administration and other operations | 9410–9430 | 6710 | NAS No. 21, para. 290, row 5 |
| Wages accrued to employees who worked on capital investments | 0810–0890 | 6710 | NAS No. 21, para. 290, row 1 |
| A one-off bonus accrued to employees | 9430 | 6710 | NAS No. 21, para. 290, row 10 |
| The wage advance paid in the middle of the month withheld | 6710 | 4210 | NAS No. 21, para. 185, row 2 |
| Personal income tax withheld from wages | 6710 | 6410 | NAS No. 21, para. 275, row 4 |
| Contributions to state trust funds at the employee's expense withheld | 6710 | 6520 | NAS No. 21, para. 280, row 4 |
| An advance not returned by an accountable person withheld from wages | 6710 | 4220–4290 | NAS No. 21, para. 290, row 13 |
| Material damage caused by an employee at fault withheld from wages | 6710 | 4730 | NAS No. 21, para. 290, row 16 |
| The next instalment for goods bought on credit withheld from wages | 6710 | 4710 | NAS No. 21, para. 290, row 15 |
| Accrued wages and bonuses paid from the cash desk | 6710 | 5010 | NAS No. 21, para. 290, row 12 |
| Overpaid wages returned to the cash desk | 5010 | 6710 | NAS No. 21, para. 290, row 8 |
Example
"Xatirchi charm" LLC (a fictional leather goods workshop) owed nothing to its employees at the start of the month. Entries during the month:
| No. | Transaction | Dr | Cr | Amount, soums |
|---|---|---|---|---|
| 1 | A wage advance paid from the cash desk in the middle of the month | 4210 | 5010 | 8,000,000 |
| 2 | Wages accrued to sewing workshop workers | 2010 | 6710 | 18,000,000 |
| 3 | Wages accrued to sales staff | 9410 | 6710 | 7,000,000 |
| 4 | Wages accrued to the director and the accountant | 9420 | 6710 | 5,000,000 |
| 5 | A one-off holiday bonus accrued | 9430 | 6710 | 1,500,000 |
| 6 | The advance withheld from wages | 6710 | 4210 | 8,000,000 |
| 7 | Income tax withheld (notional amount) | 6710 | 6410 | 3,700,000 |
| 8 | Damage for leather spoiled by a cutter withheld | 6710 | 4730 | 400,000 |
| 9 | The remaining wages paid from the cash desk | 6710 | 5010 | 18,600,000 |
Sources of the entries: 1 — para. 185, row 1; 2 — para. 290, row 4; 3 and 4 — para. 290, row 5; 5 — para. 290, row 10; 6 — para. 185, row 2; 7 — para. 275, row 4; 8 — para. 290, row 16; 9 — para. 290, row 12. The amount in row 7 is used for illustration only: in practice income tax is calculated under tax legislation.
Figures for 6710:
| Item | Amount, soums |
|---|---|
| Opening balance | 0 |
| Credit turnover (2, 3, 4, 5) | 31,500,000 |
| Debit turnover (6, 7, 8, 9) | 30,700,000 |
| Closing credit balance | 800,000 |
Check: 31,500,000 − 8,000,000 − 3,700,000 − 400,000 = 19,400,000 soums should have been paid out. 18,600,000 soums were paid from the cash desk; one craftsman who fell ill has not yet collected 800,000 soums. That is why 6710 has a credit balance of 800,000 soums, and it should appear on exactly this employee's analytical card (example prepared by the author).